UNITEDSTATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM10-K

(MarkOne)

Forthe fiscal year ended December 31, 2020

OR

Commissionfile number: 814-00866

MONROECAPITAL CORPORATION

(ExactName of Registrant as Specified in its Charter)

(312)258-8300

(Registrant’sTelephone Number, Including Area Code)

Securitiesregistered pursuant to Section 12(b) of the Act:

Securitiesregistered pursuant to Section 12(g) of the Act: None

Indicateby check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicateby check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐No ☒

Indicateby check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file suchreports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicateby check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuantto Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period thatthe registrant was required to submit such files). Yes ☒ No ☐

Indicateby check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reportingcompany, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Ifan emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period forcomplying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicateby check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectivenessof its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by theregistered public accounting firm that prepared or issued its audit report. ☐

Indicateby check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

Theaggregate market value of outstanding common stock held by non-affiliates of the registrant was $137.6 million basedon the number of shares held by non-affiliates of the registrant as of June 30, 2020, which is the last business day of theregistrant’s most recently completed second fiscal quarter.

Asof March 1, 2021, the registrant had 21,303,540 shares of common stock, $0.001 par value, outstanding.

DocumentsIncorporated by Reference

Portionsof the registrant’s definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation14A relating to the registrant’s 2021 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commissionwithin 120 days following the end of the Company’s fiscal year, are incorporated by reference in Part III of this AnnualReport on Form 10-K as indicated herein.

TABLEOF CONTENTS

CERTAINDEFINITIONS

Exceptas otherwise specified in this Annual Report on Form 10-K (“Annual Report”), the terms:

FORWARD-LOOKINGSTATEMENTS

ThisAnnual Report contains statements that constitute forward-looking statements which are subject to the safe harbor provisions ofthe Private Securities Litigation Reform Act of 1995. Statements that are not historical are forward-looking statements withinthe meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Some of the statementsin this Annual Report constitute forward-looking statements because they relate to future events or our future performance orfuture financial condition. These forward-looking statements are not historical facts, but rather are based on current expectations,estimates and projections about our company, our industry, our beliefs and our assumptions. The forward-looking statements containedin this Annual Report involve risks and uncertainties, including statements as to:

Weuse words such as “anticipates,” “believes,” “expects,” “intends,” “seeks,” “plans,” “estimates,” “targets” and similar expressions to identify forward-looking statements.The forward-looking statements contained in this Annual Report involve risks and uncertainties. Our actual results could differmaterially from those implied or expressed in the forward-looking statements for any reason, including the factors set forth in “Part I — Item 1A. Risk Factors” in this Annual Report.

Althoughwe believe that the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions couldprove to be inaccurate, and as a result, the forward-looking statements based on those assumptions also could be inaccurate. Importantassumptions include our ability to originate new loans and investments, certain margins and levels of profitability and the availabilityof additional capital. In light of these and other uncertainties, the inclusion of a projection or forward-looking statementsin this Annual Report should not be regarded as a representation by us that our plans and objectives will be achieved.

Wehave based the forward-looking statements included in this Annual Report on information available to us on the date of this AnnualReport, and we assume no obligation to update any such forward-looking statements. Although we undertake no obligation to reviseor update any forward-looking statements in this Annual Report, whether as a result of new information, future events or otherwise,you are advised to consult any additional disclosures that we may make directly to you or through reports that we may file inthe future with the Securities and Exchange Commission (the “SEC”), including Annual Reports on Form 10-K, QuarterlyReports on Form 10-Q and Current Reports on Form 8-K.

PARTI

ITEM1. BUSINESS

FORMATIONOF OUR COMPANY

Weare a Maryland corporation, formed February 9, 2011, for the purpose of purchasing an initial portfolio of loans from two fundsmanaged by Monroe Capital, raising capital in our initial public offering, which was completed in October 2012 (the “InitialPublic Offering”), and thereafter operating as an externally managed business development company (“BDC”) underthe Investment Company Act of 1940 (the “1940 Act”), as amended. We are a closed-end, non-diversified investment companythat has elected to be treated as a BDC under the 1940 Act. In addition, for tax purposes we have elected to be treated as a regulatedinvestment company (“RIC”) under the U.S. Internal Revenue Code of 1986, as amended (the “Code”), commencingwith our taxable year ended December 31, 2012.

PublicOfferings of Common Stock

TheInitial Public Offering consisted of the sale of 5,750,000 shares of our common stock at a price of $15.00 per share, resultingin net proceeds to us, net of underwriting discounts and commissions, of approximately $84.6 million. On July 22, 2013, we completeda public offering of an additional 4,000,000 shares of our common stock at a price of $14.05 per share. On August 20, 2013, wealso sold an additional 225,000 shares of our common stock at a price of $14.05 per share pursuant to the underwriters’partial exercise of the over-allotment option. These issuances during the year ended December 31, 2013 provided us with proceeds,net of offering and underwriting costs, of $56.0 million.

OnApril 20, 2015, we closed a public offering of 2,450,000 shares of our common stock at a public offering price of $14.85 per share,raising approximately $36.4 million in gross proceeds. On May 18, 2015, we completed the sale of an additional 367,500 sharesof our common stock, at a public offering price of $14.85 per share, raising approximately $5.5 million in gross proceeds pursuantto the underwriters’ exercise of the over-allotment option. Aggregate underwriters’ discounts and commissions were$1.7 million and offering costs were $0.3 million, resulting in net proceeds of approximately $39.9 million.

OnJuly 25, 2016, we closed a public offering of 3,100,000 shares of our common stock at a public offering price of $15.50 per share,raising approximately $48.1 million in gross proceeds. On August 3, 2016, we sold an additional 465,000 shares of our common stock,at a public offering price of $15.50 per share, raising approximately $7.2 million in gross proceeds pursuant to the underwriters’exercise of the over-allotment option. Aggregate underwriters’ discounts and commissions were $2.2 million and offeringcosts were $0.5 million, resulting in net proceeds of approximately $52.5 million.

OnJune 9, 2017, we closed a public offering of 3,000,000 shares of our common stock at a public offering price of $15.00 per share,raising approximately $45.0 million in gross proceeds. On June 14, 2017, pursuant to the underwriters’ exercise of the over-allotmentoption, we sold an additional 450,000 shares of our common stock, at a public offering price of $15.00 per share, raising an additional$6.8 million in gross proceeds for a total of approximately $51.8 million. Aggregate underwriters’ discounts and commissionswere $2.1 million and offering costs were $0.1 million, resulting in net proceeds of approximately $49.6 million.

At-the-marketSecurities Offering Program

On February 6, 2015, we entered into anat-the-market (“ATM”) securities offering program with MLV & Co. LLC (“MLV”) and JMP Securities LLC(“JMP”) (the “Initial ATM Program”) through which we could sell, by means of ATM offerings from time totime, up to $50.0 million of our common stock. During the year ended December 31, 2015, we sold 672,597 shares at an average priceof $14.88 per share for gross proceeds of approximately $10.0 million under the Initial ATM Program. Aggregate underwriters’discounts and commissions were $0.2 million and offering costs were $83 thousand, resulting in net proceeds of approximately $9.8million.

On July 1, 2016, we amended the InitialATM Program with MLV and JMP to replace MLV with FBR Capital Markets & Co. (“FBR”), an affiliate of MLV. On May12, 2017, we entered into new equity distribution agreements with each of FBR and JMP (the “ATM Program”). All othermaterial terms of the Initial ATM Program remain unchanged under the ATM Program. During the year ended December 31, 2017, we sold173,939 shares at an average price of $15.71 per share for gross proceeds of $2.7 million under the Initial ATM Program and noshares were sold under the ATM Program. Aggregate underwriters’ discounts and commissions were $41 thousand and offeringcosts were $23 thousand, resulting in net proceeds of approximately $2.7 million. During the year ended December 31, 2018, we sold182,299 shares at an average price of $13.82 per share for gross proceeds of approximately $2.5 million under the ATM Program.Aggregate underwriters’ discounts and commissions were $38 thousand and offering costs were $79 thousand, resulting in netproceeds of approximately $2.4 million. There were no stock issuances during the year ended December 31, 2019.

On May 8, 2020, we entered into an amendmentto the ATM Program to extend its term. All other material terms of the ATM Program remain unchanged. During the year ended December31, 2020, we sold 858,976 shares at an average price of $7.78 per share for gross proceeds of $6.7 million under the ATM program.Aggregate underwriter’s discounts and commissions were $0.1 million and offering costs were $0.1 million, resulting in netproceeds of approximately $6.5 million.

SmallBusiness Investment Company Subsidiary

OnFebruary 28, 2014, our wholly-owned subsidiary, Monroe Capital Corporation SBIC, LP (“MRCC SBIC”), a Delaware limitedpartnership, received a license from the Small Business Administration (“SBA”) to operate as a Small Business InvestmentCompany (“SBIC”) under Section 301(c) of the Small Business Investment Act of 1958. MRCC SBIC commenced operationson September 16, 2013. On April 13, 2016, MRCC SBIC was approved by the SBA for an additional $75.0 million in SBA debenturesfor a total of $115.0 million in available SBA debentures.

OVERVIEWOF OUR BUSINESS

Weare a specialty finance company focused on providing financing solutions primarily to lower middle-market companies in the UnitedStates and Canada. We provide customized financing solutions focused primarily on senior secured, junior secured and unitranchesecured (a combination of senior secured and junior secured debt in the same facility in which we syndicate a “first out”portion of the loan to an investor and retain a “last out” portion of the loan) debt and, to a lesser extent, unsecuredsubordinated debt and equity, including equity co-investments in preferred and common stock and warrants.

Ourinvestment objective is to maximize the total return to our stockholders in the form of current income and capital appreciationthrough investment in senior secured, unitranche secured and junior secured debt and, to a lesser extent, unsecured subordinateddebt and equity investments. We seek to use our extensive leveraged finance origination infrastructure and broad expertise insourcing loans to invest in primarily senior secured, unitranche secured and junior secured debt of middle-market companies. Webelieve that our primary focus on lending to lower middle-market companies offers several advantages as compared to lending tolarger companies, including more attractive economics, lower leverage, more comprehensive and restrictive covenants, more expansiveevents of default, relatively small debt facilities that provide us with enhanced influence over our borrowers, direct accessto borrower management and improved information flow.

Sincethe consummation of the Initial Public Offering, we have grown the fair value of our portfolio of investments to approximately$547.0 million at December 31, 2020. Our portfolio at December 31, 2020 consists of 89 different portfolio companies and holdingsinclude senior secured, junior secured and unitranche secured debt and equity investments. As of December 31, 2020, we have borrowed$126.6 million under our revolving credit facility, we have $109.0 million in aggregate principal amount of senior unsecured notes(“2023 Notes”) outstanding and we have drawn $115.0 million in SBA debentures to finance the purchase of our assets.

Ourinvestments will generally range between $2.0 million and $25.0 million each, although this investment size may vary proportionatelywith the size of our capital base. As of December 31, 2020, our portfolio included approximately 74.1% senior secured loans, 11.7%unitranche secured loans, 2.6% junior secured loans and 11.6% equity securities. We expect that the companies in which we investmay be leveraged, often as a result of leveraged buy-outs or other recapitalization transactions, and, in certain cases, willnot be rated by national ratings agencies. If such companies were rated, we believe that they would typically receive a ratingbelow investment grade (between BB and CCC under the Standard & Poor’s system) from the national rating agencies.

Whileour primary focus is to maximize current income and capital appreciation through debt investments in thinly traded or privateU.S. companies, we may invest a portion of the portfolio in opportunistic investments in order to seek to enhance returns to stockholders.Such investments may include investments in high-yield bonds, distressed debt, private equity or securities of public companiesthat are not thinly traded and securities of middle-market companies located outside of the United States. We expect that thesepublic companies generally will have debt securities that are non-investment grade.

OURINVESTMENT ADVISOR

Ourinvestment activities are managed by our investment advisor, MC Advisors. MC Advisors is responsible for sourcing potential investments,conducting research and due diligence on prospective investments and their private equity sponsors, analyzing investment opportunities,structuring our investments and managing our investments and portfolio companies on an ongoing basis. MC Advisors was organizedin February 2011 and is a registered investment adviser under the Investment Advisers Act of 1940, as amended (the “AdvisersAct”).

Underour Investment Advisory and Management Agreement with MC Advisors, we pay MC Advisors a base management fee and an incentive feefor its services. While not expected to review or approve each investment, our independent directors periodically review MC Advisors’services and fees as well as its portfolio management decisions and portfolio performance. In connection with these reviews, ourindependent directors consider whether our fees and expenses (including those related to leverage) remain appropriate.

MCAdvisors seeks to capitalize on the significant deal origination, credit underwriting, due diligence, investment structuring,execution, portfolio management and monitoring experience of Monroe Capital’s investment professionals. The senior managementteam of Monroe Capital, including Theodore L. Koenig and Aaron D. Peck, provides investment services to MC Advisors pursuant toa staffing agreement, or the Staffing Agreement, between MC Management, an affiliate of Monroe Capital, and MC Advisors. Messrs.Koenig and Peck have developed a broad network of contacts within the investment community and average more than 30 years of experienceinvesting in debt and equity securities of lower middle-market companies. In addition, Messrs. Koenig and Peck have extensiveexperience investing in assets that constitute our primary focus and have expertise in investing throughout all periods of theeconomic cycle. MC Advisors is an affiliate of Monroe Capital and is supported by experienced investment professionals of MonroeCapital under the terms of the Staffing Agreement. Monroe Capital’s core team of investment professionals has an establishedtrack record in sourcing, underwriting, executing and monitoring transactions. From Monroe Capital’s formation in 2004 throughDecember 31, 2020, Monroe Capital’s investment professionals invested in over 1,400 loans and related investments in anaggregate amount of over $20.0 billion.

Inaddition to their roles with Monroe Capital and MC Advisors, Messrs. Koenig and Peck serve as interested directors. Mr. Koenighas more than 35 years of experience in structuring, negotiating and closing transactions on behalf of asset-backed lenders, commercialfinance companies, financial institutions and private equity investors at organizations including Monroe Capital, which Mr. Koenigfounded in 2004, and Hilco Capital LP, where he led investments in over 20 companies in the lower middle-market. Mr. Peck hasmore than 25 years of public company management, leveraged finance and commercial lending experience at organizations includingDeerfield Capital Management LLC, Black Diamond Capital Management LLC and Salomon Smith Barney Inc. Messrs. Koenig and Peck arejoined on the investment committee of MC Advisors by Michael J. Egan and Jeremy T. VanDerMeid, each of whom is a senior investmentprofessional at Monroe Capital. Mr. Egan has more than 35 years of experience in commercial finance, credit administration andbanking at organizations including Hilco Capital, The CIT Group/Business Credit, Inc., The National Community Bank of New Jersey(The Bank of New York) and KeyCorp. Mr. VanDerMeid has more than 20 years of lending and corporate finance experience at organizationsincluding Morgan Stanley Investment Management, Dymas Capital Management Company, LLC and Heller Financial.

ABOUTMONROE CAPITAL

MonroeCapital, a Delaware limited liability company that was founded in 2004, is a leading lender to middle-market companies. As ofDecember 31, 2020, Monroe Capital had approximately $9.4 billion in assets under management. Over its seventeen-year history,Monroe Capital has developed an established lending platform that we believe generates consistent deal flow from a network ofproprietary relationships. Monroe Capital’s assets under management are comprised of a diverse portfolio of over 500 currentinvestments that were either originated directly by Monroe Capital or sourced from Monroe Capital’s third-party relationships.From Monroe Capital’s formation in 2004 through December 31, 2020, Monroe Capital’s investment professionals investedin over 1,400 loans and related investments in an aggregate amount of over $20.0 billion. The senior investment team of MonroeCapital averages more than 30 years of experience and has developed a proven investment and portfolio management process thathas performed through multiple market cycles. In addition, Monroe Capital’s investment professionals are supported by arobust infrastructure of administrative and back-office personnel focused on compliance, operations, finance, treasury, legal,accounting and reporting, marketing, information technology and office management.

INVESTMENTSTRATEGY

Ourinvestment objective is to maximize the total return to our stockholders in the form of current income and capitalappreciation primarily through investments in senior, unitranche and junior secured debt and, to a lesser extent, unsecuredsubordinated debt and equity. We also seek to invest opportunistically in attractively priced, broadly syndicated loans,which should enhance our geographic and industry portfolio diversification and increase our portfolio’s liquidity. Wedo not target any specific industry, however, as of December 31, 2020, our investments in the High Tech Industries; Services:Business; and Banking, Finance, Insurance & Real Estate industries representedapproximately 14.9%, 14.4% and 13.3%, respectively, of the fair value of our portfolio. To achieve our investmentobjective, we utilize the following investment strategy:

AttractiveCurrent Yield on Investment Portfolio. We believe our sourcing network allows us to enter into transactions with attractiveyields and investment structures. Based on current market conditions and our pipeline of new investments, we expect our targetdirectly originated senior and unitranche secured debt will have an average maturity of three to seven years and interest ratesof 7% to 13%, and we expect our target directly originated junior secured debt and unsecured subordinated debt will have an averagematurity of four to seven years and interest rates of 8% to 15%. In addition, based on current market conditions and our pipelineof new investments, we expect that our target debt investments will typically have a variable coupon (with a LIBOR floor), mayinclude payment-in-kind (“PIK”) interest (interest that is not received in cash, but added to the principal balanceof the loan), and that we will typically receive upfront closing fees of 1% to 4%. We may also receive warrants or other formsof upside equity participation. Our transactions are generally secured and supported by a lien on all assets and/or a pledge ofcompany stock in order to provide priority of return and to influence any corporate actions. Although we will target investmentswith the characteristics described in this paragraph, we cannot provide assurance that our new investments will have these characteristicsand we may enter into investments with different characteristics as the market dictates. For a description of the characteristicsof our current investment portfolio, see “Management’s Discussion and Analysis of Financial Condition and Resultsof Operations — Portfolio and Investment Activity.” Until investment opportunities can be found, we mayinvest our undeployed capital in cash, cash equivalents, U.S. government securities and high-quality debt investments that maturein one year or less from the date of investment. These temporary investments may have lower yields than our other investmentsand, accordingly, may result in lower distributions, if any, during such period.

SoundPortfolio Construction. We strive to exercise discipline in portfolio creation and management and to implement effectivegovernance throughout our business. Monroe Capital and MC Advisors, which is comprised of substantially the same investment professionalswho have operated Monroe Capital, have been, and we believe will continue to be, conservative in the underwriting and structuringof covenant packages in order to enable early intervention in the event of weak financial performance by a portfolio company.We seek to pursue lending opportunities selectively and to maintain a diversified portfolio. We believe that exercising disciplinedportfolio management through continued intensive account monitoring and timely and relevant management reporting allows us tomitigate risks in our debt investments. In addition, we have implemented rigorous governance processes through segregation ofduties, documented policies and procedures and independent oversight and review of transactions, which we believe helps us tomaintain a low level of non-performing loans. We believe that Monroe Capital’s proven process of thorough origination, conservativeunderwriting, due diligence and structuring, combined with careful account management and diversification, enabled it to protectinvestor capital, and we believe MC Advisors follows the same philosophy and processes in originating, structuring and managingour portfolio investments.

Predictabilityof Returns. Beyond conservative structuring and protection of capital, we seek a predictable exit from our investments.We seek to invest in situations where there are a number of potential exit options that can result in full repayment or a modestrefinance of our investment. We seek to structure the majority of our transactions as secured loans with a covenant package thatprovides for full or partial repayment upon the completion of asset sales and restructurings. Because we seek to structure thesetransactions to provide for contractually determined, periodic payments of principal and interest, we are less likely to dependon merger and acquisition activity or public equity markets to exit our debt investments. As a result, we believe that we canachieve our target returns even in a period when public markets are depressed.

BUSINESSSTRATEGY

Webelieve that we represent an attractive investment opportunity for the following reasons:

Deep,Experienced Management Team. We are managed by MC Advisors, which has access through the Staffing Agreement to MonroeCapital’s experienced team comprised of over 130 professionals, including seven senior partners that average more than 30years of direct lending experience. We are led by our Chairman and Chief Executive Officer, Theodore L. Koenig, and Aaron D. Peck,our Chief Financial Officer and Chief Investment Officer. This extensive experience includes the management of investments withborrowers of varying credit profiles and transactions completed in all phases of the credit cycle. Monroe Capital’s seniorinvestment professionals provide us with a difficult-to-replicate sourcing network and a broad range of transactional, financial,managerial and investment skills. This expertise and experience is supported by administrative and back office personnel focusedon operations, finance, legal and compliance, accounting and reporting, marketing, information technology and office management.From Monroe Capital’s formation in 2004 through December 31, 2020, Monroe Capital’s investment professionals investedin over 1,400 loans and related investments in an aggregate amount of over $20.0 billion.

DifferentiatedRelationship-Based Sourcing Network. We believe Monroe Capital’s senior investment professionals benefit from extensiverelationships with commercial banks, private equity firms, financial intermediaries, management teams and turn-around advisors.We believe that this broad sourcing network differentiates us from our competitors and offers us a diversified origination approachthat does not rely on a single channel and offers us consistent deal flow throughout the economic cycle. We also believe thatthis broad network allows us to originate a substantial number of non-private equity-sponsored investments.

ExtensiveInstitutional Platform for Originating Middle-Market Deal Flow. Monroe Capital’s broad network of relationshipsand significant origination resources enable us to review numerous lending opportunities, permitting us to exercise a high degreeof selectivity in terms of loans to which we ultimately commit. Monroe Capital estimates that it reviewed approximately 2,000investment opportunities during 2020. Monroe Capital’s over 1,400 previously executed transactions, over 500 of which arewith current borrowers, offer us another source of deal flow, as these debt investments reach maturity or seek refinancing. Weare also positioned to benefit from Monroe Capital’s established brand name, strong track record in partnering with industryparticipants and reputation for closing deals on time and as committed. Monroe Capital’s senior investment professionalsare complemented by extensive experience in capital markets transactions, risk management and portfolio monitoring.

Disciplined, “Credit-First” Underwriting Process. Monroe Capital has developed a systematic underwriting process that appliesa consistent approach to credit review and approval, with a focus on evaluating credit first and then appropriately assessingthe risk-reward profile of each loan. MC Advisors’ assessment of credit outweighs pricing and other considerations, as weseek to minimize potential credit losses through effective due diligence, structuring and covenant design. MC Advisors seeks tocustomize each transaction structure and financial covenant to reflect risks identified through the underwriting and due diligenceprocess. We also seek to actively manage our origination and credit underwriting activities through personal visits and callson all parties involved with an investment, including the management team, private equity sponsors, if any, or other lenders.

EstablishedCredit Risk Management Framework. We seek to manage our credit risk through a well-defined portfolio strategy and creditpolicy. In terms of credit monitoring, MC Advisors assigns each loan to a particular portfolio management professional and maintainsan internal credit rating analysis for all loans. MC Advisors then employs ongoing review and analysis, together with regularinvestment committee meetings to review the status of certain complex and challenging loans and a comprehensive quarterly reviewof all loan transactions. MC Advisors’ investment professionals also have significant turnaround and debt work-out experience,which gives them perspective on the risks and possibilities throughout the entire credit cycle. We believe this careful approachto investment and monitoring enables us to identify problems early and gives us an opportunity to assist borrowers before theyface difficult liquidity constraints. By anticipating possible negative contingencies and preparing for them, we believe thatwe diminish the probability of underperforming assets and loan losses.

INVESTMENTS

InvestmentStructure

Westructure our investments, which typically have maturities of three to seven years, as follows:

SeniorSecured Loans. We structure senior secured loans to obtain security interests in the assets of the portfolio company borrowersthat serve as collateral in support of the repayment of such loans. This collateral may take the form of first-priority lienson the assets of the portfolio company borrower. Our senior secured loans may provide for moderate loan amortization in the earlyyears of the loan, with the majority of the amortization deferred until loan maturity.

UnitrancheSecured Loans. We structure our unitranche secured loans as senior secured loans. We obtain security interests in the assetsof these portfolio companies that serve as collateral in support of the repayment of these loans. This collateral may take theform of first-priority liens on the assets of a portfolio company. Generally, we syndicate a “first out” portion ofthe loan to an investor and retain a “last out” portion of the loan, in which case the “first out” portionof the loan will generally receive priority with respect to payments of principal, interest and any other amounts due thereunder.Unitranche structures combine characteristics of traditional first lien senior secured as well as second lien and subordinatedloans and our unitranche secured loans will expose us to the risks associated with second lien and subordinated loans and maylimit our recourse or ability to recover collateral upon a portfolio company’s bankruptcy. Unitranche secured loans typicallyprovide for moderate loan amortization in the initial years of the facility, with the majority of the amortization deferred untilloan maturity. Unitranche secured loans generally allow the borrower to make a large lump sum payment of principal at the endof the loan term, and there is a risk of loss if the borrower is unable to pay the lump sum or refinance the amount owed at maturity.In many cases we, together with our affiliates, are the sole or majority lender of our unitranche secured loans, which can affordus additional influence with a borrower in terms of monitoring and, if necessary, remediation in the event of underperformance.

JuniorSecured Loans. We structure junior secured loans to obtain a security interest in the assets of these portfolio companiesthat serves as collateral in support of the repayment of such loans. This collateral may take the form of second priority lienson the assets of a portfolio company. These loans typically provide for moderate loan amortization in the initial years of thefacility, with the majority of the amortization deferred until loan maturity.

PreferredEquity . We generally structure preferred equity investments to combine features of equity and debt. We may obtain a securityinterest in the assets of these portfolio companies that serves as collateral in support of the repayment of such preferred equity,which takes a priority to common stockholders. Preferred equity interests generally have a stated dividend rate and may not havea fixed maturity date.

Warrantsand Equity Co-Investment Securities. In some cases, we may also receive nominally priced warrants or options to buy a minorityequity interest in the portfolio company in connection with a loan. As a result, as a portfolio company appreciates in value,we may achieve additional investment return from this equity interest. We may structure such warrants to include provisions protectingour rights as a minority-interest holder, as well as a “put,” or right to sell such securities back to the issuer,upon the occurrence of specified events. In other cases, we may make a minority equity co-investment in the portfolio companyin connection with a loan. Additionally, we may receive equity in our distressed portfolio companies in conjunction with amendmentsor additional debt fundings.

Wetailor the terms of each investment to the facts and circumstances of the transaction and the prospective portfolio company, negotiatinga structure that protects our rights and manages our risk while creating incentives for the portfolio company to achieve its businessplan and improve its operating results. We seek to limit the downside potential of our investments by:

Weexpect to hold most of our investments to maturity or repayment, but we may sell some of our investments earlier if a liquidityevent occurs, such as a sale, recapitalization or worsening of the credit quality of the portfolio company ,or if an investment has reached its return target .

SeniorLoan Fund. We have invested in SLF, which as of December 31, 2020, consisted of loans to different borrowers in industriessimilar to the companies in our portfolio. SLF invests primarily in senior secured loans of middle market companies. These seniorsecured loans are generally similar to our senior secured loans, which are secured by a first lien on some or all of the issuer’sassets and include traditional senior debt and any related revolving or similar credit facility. SLF may also invest in more liquidsenior secured loans.

Investments

Weseek to create a diverse portfolio that includes senior secured, unitranche secured, junior secured loans and warrants and equityco-investment securities by investing approximately $2.0 million to $25.0 million of capital, on average, in the securities ofmiddle-market companies. This investment size may vary proportionately with the size of our capital base. Set forth below is alist of our ten largest portfolio company investments as of December 31, 2020, as well as the top ten industries in which we wereinvested as of December 31, 2020, in each case excluding SLF, calculated as a percentage of our total investments at fair valueas of such date (in thousands):

INVESTMENTPROCESS OVERVIEW

Weview our investment process as consisting of the phases described below:

Origination. MCAdvisors seeks to develop investment opportunities through extensive relationships with regional banks, private equity firms,financial intermediaries, management teams and other turn-around advisors. Monroe Capital has developed this network sinceits formation in 2004. MC Advisors manages these leads through personal visits and calls by its senior deal professionals. Itis these professionals’ responsibility to identify specific opportunities, refine opportunities through due diligenceregarding the underlying facts and circumstances and utilize innovative thinking and flexible terms to solve the financingissues of prospective clients. Monroe Capital’s origination professionals are broadly dispersed with six offices in theUnited States. Certain of Monroe Capital’s originators are responsible for covering a specified target market based ongeography and others focus on specialized industry verticals. We believe Monroe Capital’s originationprofessionals’ experience is vital to enable us to provide our borrowers with innovative financing solutions. Wefurther believe that their strength and breadth of relationships across a wide range of markets will generate numerousfinancing opportunities and enable us to be highly selective in our lending activities. In sourcing new transactions, MCAdvisors seeks opportunities to work with borrowers primarily domiciled in the United States and Canada and typically focuseson industries in which Monroe Capital has previous lending experience.

DueDiligence. For each of our investments, MC Advisors prepares a comprehensive new business presentation, which summarizesthe investment opportunity and its due diligence and risk analysis, all from the perspective of strengths, weaknesses, opportunitiesand threats presented by the opportunity. This presentation assesses the borrower and its management, including products and servicesoffered, market position, sales and marketing capabilities and distribution channels; key contracts, customers and suppliers,meetings with management and facility tours; background checks on key executives; customer calls; and an evaluation of exit strategies.MC Advisors’ presentation typically evaluates historical financial performance of the borrower and includes projections,including operating trends, an assessment of the quality of financial information, capitalization and liquidity measures and debtservice capacity. The financial analysis also includes sensitivity analysis against management projections and an analysis ofpotential downside scenarios, particularly for cyclical businesses. MC Advisors seeks to also review the dynamics of the borrowers’industry and assess the maturity, market size, competition, technology and regulatory issues confronted by the industry. Finally,MC Advisors’ new business presentation includes all relevant third-party reports and assessments, including, as applicable,analyses of the quality of earnings of the prospective borrower, a review of the business by industry experts and third-partyvaluations. MC Advisors also includes in this due diligence, if relevant, field exams, collateral appraisals and environmentalreviews, as well as a review of comparable private and public transactions.

Underwriting. MC Advisors uses the systematic, consistent approach to credit evaluation developed in house by Monroe Capital with aparticular focus on determining the value of a business in a downside scenario. In this process, the senior investment professionalsat MC Advisors bring to bear extensive lending experience with emphasis on lessons learned from past credit cycles. Webelieve that the extensive credit and debt work-out experience of Monroe Capital’s senior management enables us to anticipateproblems and minimize risks. Monroe Capital’s underwriting professionals work closely with its origination professionalsto identify individual deal strengths, risks and any risk mitigants. MC Advisors preliminarily screens transactions based on cashflow, enterprise value and asset-based characteristics, and each of these measures is developed on a proprietary basis using thoroughcredit analysis focused on sustainability and predictability of cash flow to support enterprise value, barriers to entry, marketposition, competition, customer and supplier relationships, management strength, private equity sponsor track record and industrydynamics. For asset-based transactions, MC Advisors seeks to understand current and future collateral value, opening availabilityand ongoing liquidity. MC Advisors documents this preliminary analysis which is thoroughly reviewed by at least one member ofits investment committee prior to proposing a formal term sheet. We believe this early involvement of the investment committeeensures that our resources and those of third parties are deployed appropriately and efficiently during the investment processand lowers execution risk for our clients. With respect to transactions reviewed by MC Advisors, we expect that only approximately10% of our sourced deals will reach the formal term sheet stage.

CreditApproval/Investment Committee Review. MC Advisors employs a standardized, structured process developed by Monroe Capitalwhen evaluating and underwriting new investments for our portfolio. MC Advisors’ investment committee considers its comprehensivenew business presentation to approve or decline each investment. This committee includes Messrs. Koenig, Peck, Egan and VanDerMeid.The committee is committed to providing a prompt turnaround on investment decisions. Each meeting to approve an investment requiresa quorum of at least three members of the investment committee, and each investment must receive unanimous approval by such membersof the investment committee.

Thefollowing chart illustrates the stages of MC Advisors’ evaluation process:

EvaluationProcess

Execution. We believe Monroe Capital has developed a strong reputation for closing deals as proposed, and we intend to continue thistradition. Through MC Advisors’ consistent approach to credit evaluation and underwriting, we seek to close deals as fastor faster than competitive financing providers while maintaining the discipline with respect to credit, pricing and structurenecessary to ensure the ultimate success of the financing.

Monitoring. Webenefit from the portfolio management system in place at Monroe Capital. This monitoring includes regular meetings betweenthe responsible analyst and our portfolio company to discuss market activity and current events. MC Advisors’ portfoliomanagement staff closely monitors all credits, with senior portfolio managers covering agented and more complex investmentswith the support of junior portfolio management staff. MC Advisors segregates our capital markets investments by industry. MCAdvisors’ monitoring process, developed by Monroe Capital, has daily, weekly, monthly and quarterly components andrelated reports, each to evaluate performance against historical, budget and underwriting expectations. MC Advisors’analysts monitor performance using standard industry software tools to provide consistent disclosure of performance. Whennecessary, MC Advisors updates our internal risk ratings, borrowing base criteria and covenant compliance reports.

Aspart of the monitoring process, MC Advisors regularly assesses the risk profile of each of our investments and rates each of thembased on an internal proprietary system that uses the categories listed below, which we refer to as MC Advisors’ investmentperformance rating. For any investment rated in grades 3, 4 or 5, MC Advisors, through its internal Portfolio Management Group(“PMG”), will increase its monitoring intensity and prepare regular updates for the investment committee, summarizingcurrent operating results and material impending events and suggesting recommended actions. The PMG is responsible for oversightand management of any investments rated in grades 3, 4 or 5. MC Advisors monitors and, when appropriate, changes the investmentratings assigned to each investment in our portfolio. In connection with our valuation process, MC Advisors reviews these investmentratings on a quarterly basis. The investment performance rating system is described as follows:

Ourinvestment performance risk ratings do not constitute any rating of investments by a nationally recognized statistical ratingorganization or reflect or represent any third-party assessment of any of our investments.

Inthe event of a delinquency or a decision to rate an investment grade 4 or grade 5, the PMG, in consultation with the investmentcommittee, will develop an action plan. Such a plan may require a meeting with the borrower’s management or the lender groupto discuss reasons for the default and the steps management is undertaking to address the under-performance, as well as amendmentsand waivers that may be required. In the event of a dramatic deterioration of a credit, MC Advisors and the PMG will form a teamor engage outside advisors to analyze, evaluate and take further steps to preserve our value in the credit. In this regard, wewould expect to explore all options, including in a private equity sponsored investment, assuming certain responsibilities forthe private equity sponsor or a formal sale of the business with oversight of the sale process by us. The PMG and the investmentcommittee have extensive experience in running debt work-out transactions and bankruptcies.

Thefollowing table shows the distribution of our investments on the 1 to 5 investment performance risk rating scale as of December31, 2020 (in thousands):

Thefollowing table shows the distribution of our investments on the 1 to 5 investment performance risk rating scale as of December31, 2019 (in thousands):

SUMMARYRISK FACTORS

Therisk factors described below are a summary of the principal risk factors associated with an investment in us. These are not theonly risks we face. You should carefully consider these risk factors, together with the risk factors set forth in Item 1A. ofthis Annual Report on Form 10-K and the other reports and documents filed by us with the SEC.

Weare subject to risks relating to our business and structure

Weare subject to risks relating to our investments

Weare subject to risks relating to our securities

MANAGEMENTAND OTHER AGREEMENTS

MCAdvisors is located at 311 South Wacker Drive, Suite 6400, Chicago, Illinois 60606. MC Advisors is a registered investment adviserunder the Advisers Act. Subject to the overall supervision of our Board and in accordance with the 1940 Act, MC Advisors managesour day-to-day operations and provides investment advisory services to us. Under the terms of the Investment Advisory and ManagementAgreement, MC Advisors:

MCAdvisors’ services under the Investment Advisory and Management Agreement are not exclusive, and it is free to furnish similarservices to other entities so long as its services to us are not impaired.

Managementand Incentive Fee

Underthe Investment Advisory and Management Agreement with MC Advisors and subject to the overall supervision of our Board, MC Advisorsprovides investment advisory services to us. For providing these services, MC Advisors receives a fee from us, consisting of twocomponents — a base management fee and an incentive fee.

OnNovember 4, 2019, our Board approved a change to the Investment Advisory Agreement to amend the base management fee structure.Effective July 1, 2019, the base management fee is calculated initially at an annual rate equal to 1.75% of average invested assets(calculated as total assets excluding cash, which includes assets financed using leverage); provided, however, the base managementfee is calculated at an annual rate equal to 1.00% of our average invested assets (calculated as total assets excluding cash,which includes assets financed using leverage) that exceeds the product of (i) 200% and (ii) our average net assets. For the avoidanceof doubt, the 200% is calculated in accordance with the asset coverage limitation as defined in the 1940 Act to give effect toour exemptive relief with respect to MRCC SBIC’s SBA debentures. This change has the effect of reducing our base managementfee rate on assets in excess of regulatory leverage of 1:1 debt to equity to 1.00% per annum. The base management fee is payablequarterly in arrears.

Priorto July 1, 2019, the base management fee was calculated at an annual rate equal to 1.75% of average invested assets (calculatedas total assets excluding cash, which included assets financed using leverage) and was payable quarterly in arrears.

Theincentive fee consists of two parts. The first part is calculated and payable quarterly in arrears based on our pre-incentivefee net investment income for the preceding quarter subject to a total return requirement. Pre-incentive fee net investment incomemeans interest income, dividend income and any other income (including any other fees such as commitment, origination, structuring,diligence and consulting fees or other fees that we receive from portfolio companies but excluding fees for providing managerialassistance) accrued during the calendar quarter, minus operating expenses for the quarter (including the base management fee,any expenses payable under our administration agreement between us and MC Management (the “Administration Agreement”)and any interest expense and dividends paid on any outstanding preferred stock, but excluding the incentive fee). Pre-incentivefee net investment income includes, in the case of investments with a deferred interest feature such as market discount, debtinstruments with PIK interest, preferred stock with PIK dividends and zero-coupon securities, accrued income that we have notyet received in cash. MC Advisors is not under any obligation to reimburse us for any part of the incentive fee it received thatwas based on accrued interest that we never actually receive.

Theforegoing incentive fee is subject to a total return requirement, which provides that no incentive fee in respect of our pre-incentivefee net investment income will be payable except to the extent 20.0% of the cumulative net increase in net assets resulting fromoperations over the then-current and 11 preceding quarters exceeds the cumulative incentive fees accrued and/or paid for the 11preceding quarters (the “Incentive Fee Limitation”). Therefore, any ordinary income incentive fee that is payablein a calendar quarter will be limited to the lesser of (i) 20% of the amount by which our pre-incentive fee net investment incomefor such calendar quarter exceeds the 2% hurdle described below, subject to the “catch-up” provision, and (ii) (x)20% of the cumulative net increase in net assets resulting from operations for the then current and 11 preceding calendar quartersminus (y) the cumulative incentive fees accrued and/or paid for the 11 preceding calendar quarters. For the foregoing purpose,the “cumulative net increase in net assets resulting from operations” is the amount, if positive, of the sum of ourpre-incentive fee net investment income, base management fees, realized gains and losses and unrealized gains and losses for thethen-current and 11 preceding calendar quarters.

Pre-incentivefee net investment income does not include any realized capital gains or losses or unrealized capital gains or losses. If anydistributions from portfolio companies are characterized as a return of capital, such returns of capital would affect the capitalgains incentive fee to the extent a gain or loss is realized. Because of the structure of the incentive fee, it is possible thatwe may pay an incentive fee in a quarter where we incur a loss. For example, if we receive pre-incentive fee net investment incomein excess of the hurdle rate (as defined below) for a quarter, we will pay the applicable incentive fee even if we have incurreda loss in that quarter due to realized and unrealized capital losses.

Pre-incentivefee net investment income, expressed as a rate of return on the value of our net assets (defined as total assets less indebtednessand before taking into account any incentive fees payable during the period) at the end of the immediately preceding calendarquarter, is compared to a fixed “hurdle rate” of 2% per quarter (8% annually). If market interest rates rise, we maybe able to invest our funds in debt instruments that provide for a higher return, which would increase our pre-incentive fee netinvestment income and make it easier for MC Advisors to surpass the fixed hurdle rate and receive an incentive fee based on suchnet investment income.

Wepay MC Advisors an incentive fee with respect to our pre-incentive fee net investment income in each calendar quarter as follows:

Thesecalculations are adjusted for any share issuances or repurchases during the quarter.

Thefollowing is a graphical representation of the calculation of the income-related portion of the incentive fee:

QuarterlyIncentive Fee Based on Pre-Incentive Fee Net Investment Income

Pre-incentivefee net investment income (expressed as a percentage of the value of net assets)

Percentageof pre-incentive fee net investment income allocated to income-related portion
of incentive fee

Thesecalculations will be appropriately prorated for any period of less than three months and adjusted for any share issuances or repurchasesduring the current quarter.

Thesecond part of the incentive fee is a capital gains incentive fee that is determined and payable in arrears as of the end of eachfiscal year (or upon termination of the investment advisory and management agreement, as of the termination date), and equals20% of our realized capital gains as of the end of the fiscal year. In determining the capital gains incentive fee payable toMC Advisors, we calculate the cumulative aggregate realized capital gains and cumulative aggregate realized capital losses sinceour inception, and the aggregate unrealized capital depreciation as of the date of the calculation, as applicable, with respectto each of the investments in our portfolio. For this purpose, cumulative aggregate realized capital gains, if any, equals thesum of the differences between the net sales price of each investment, when sold, and the amortized cost of such investment. Cumulativeaggregate realized capital losses equals the sum of the amounts by which the net sales price of each investment, when sold, isless than the amortized cost of such investment since our inception. Aggregate unrealized capital depreciation equals the sumof the difference, if negative, between the valuation of each investment as of the applicable calculation date and the amortizedcost of such investment. At the end of the applicable year, the amount of capital gains that serves as the basis for our calculationof the capital gains incentive fee equals the cumulative aggregate realized capital gains less cumulative aggregate realized capitallosses, less aggregate unrealized capital depreciation, with respect to our portfolio of investments. If this number is positiveat the end of such year, then the capital gains incentive fee for such year equals 20% of such amount, less the aggregate amountof any capital gains incentive fees paid in respect of our portfolio in all prior years.

Examplesof Quarterly Incentive Fee Calculation

Example1: Income Related Portion of Incentive Fee before Total Return Requirement Calculation

Alternative1

Assumptions

Investmentincome (including interest, dividends, fees, etc.) = 1.25%
Hurdle rate ⁽¹⁾ = 2%
Management fee ⁽²⁾ = 0.4375%
Other expenses (legal, accounting, custodian, transfer agent, etc.) = 0.2%
Pre-incentive fee net investment income
(investment income – (management fee + other expenses)) = 0.6125%

Pre-incentivefee net investment income does not exceed hurdle rate, therefore there is no income-related incentive fee.

Alternative2

Assumptions

Investmentincome (including interest, dividends, fees, etc.) = 3.0%
Hurdle rate ⁽¹⁾ = 2%
Management fee ⁽²⁾ = 0.4375%
Other expenses (legal, accounting, custodian, transfer agent, etc.) = 0.2%
Pre-incentive fee net investment income
(investment income – (management fee + other expenses)) = 2.3625%

Incentivefee = 100% × Pre-incentive fee net investment income (subject to “catch-up”) ⁽³⁾
= 100% × (2.3625% – 2%)
= 0.3625%

Pre-incentivefee net investment income exceeds the hurdle rate, but does not fully satisfy the “catch-up” provision, thereforethe income-related portion of the incentive fee is 0.3625%.

Alternative3

Assumptions

Investmentincome (including interest, dividends, fees, etc.) = 3.5%
Hurdle rate ⁽¹⁾ = 2%
Management fee ⁽²⁾ = 0.4375%
Other expenses (legal, accounting, custodian, transfer agent, etc.) = 0.2%
Pre-incentive fee net investment income
(investment income – (management fee + other expenses)) = 2.8625%
Incentive fee = 100% × Pre-incentive fee net investment income (subject to “catch-up”) ⁽³⁾
Incentive fee = 100% × “catch-up” + (20% × (Pre-incentive fee net investment income – 2.5%))
“Catch-up”   = 2.5% – 2%
=0.5%

Incentivefee = (100% × 0.5%) + (20% × (2.8625% – 2.5%))
=0.5% + (20% × 0.3625%)
=0.5% + 0.0725%
=0.5725%

Pre-incentivefee net investment income exceeds the hurdle rate, and fully satisfies the “catch-up” provision, therefore the incomerelated portion of the incentive fee is 0.5725%.

Example2: Income Portion of Incentive Fee with Total Return Requirement Calculation

Assumptions

Hurdlerate ⁽¹⁾ = 2%
Management fee ⁽²⁾ = 0.4375%

Otherexpenses (legal, accounting, transfer agent, etc.) = 0.2%

Cumulativeincentive compensation accrued and/or paid for
preceding 11 calendar quarters = $9 million

Alternative1

AdditionalAssumptions

Investmentincome (including interest, dividends, fees, etc.) = 3.50%
Pre-incentive fee net investment income
(investment income – (management fee + other expenses)) = 2.8625%
20.0% of cumulative net increase in net assets resulting from operations over
current and preceding 11 calendar quarters = $8 million

Althoughour pre-incentive fee net investment income exceeds the hurdle rate of 2.0% (as shown in Alternative 3 of Example 1 above), noincentive fee is payable because 20.0% of the cumulative net increase in net assets resulting from operations over the then currentand 11 preceding calendar quarters did not exceed the cumulative income and capital gains incentive fees accrued and/or paid forthe preceding 11 calendar quarters.

Alternative2

AdditionalAssumptions

InvestmentIncome (including interest, dividends, fees, etc.) = 3.50%
Pre-incentive fee net investment income
(investment income – (management fee + other expenses)) = 2.8625%
20% of cumulative net increase in net assets resulting from operations over
current and preceding 11 calendar quarters = $10 million

Becauseour pre-incentive fee net investment income exceeds the hurdle rate of 2.0% and because 20.0% of the cumulative net increase innet assets resulting from operations over the then current and 11 preceding calendar quarters exceeds the cumulative income andcapital gains incentive fees accrued and/or paid for the preceding 11 calendar quarters, an incentive fee would be payable, asshown in Alternative 3 of Example 1 above.

Example3: Capital Gains Portion of Incentive Fee (*)

Alternative1:

Assumptions

Year1:  $20 million investment made in Company A (“Investment A”), and $30 million investment made in CompanyB (“Investment B”)

Year2:  Investment A sold for $50 million and fair market value (“FMV”) of Investment B determined to be $32million

Year3:  FMV of Investment B determined to be $25 million

Year4:  Investment B sold for $31 million

Thecapital gains portion of the incentive fee would be:

Year1:  None

Year2:  Capital gains incentive fee of $6 million — ($30 million realized capital gains on sale of InvestmentA multiplied by 20%)

Year3:  None — $5 million (20% multiplied by ($30 million cumulative capital gains less $5 million cumulativecapital depreciation)) less $6 million (previous capital gains fee paid in Year 2)

Year4:  Capital gains incentive fee of $200,000 — $6.2 million ($31 million cumulative realized capitalgains multiplied by 20%) less $6 million (capital gains incentive fee taken in Year 2)

Alternative2

Assumptions

Year1:  $20 million investment made in Company A (“Investment A”), $30 million investment made in Company B(“Investment B”) and $25 million investment made in Company C (“Investment C”)

Year2:  Investment A sold for $50 million, FMV of Investment B determined to be $25 million and FMV of Investment C determinedto be $25 million

Year3:  FMV of Investment B determined to be $27 million and Investment C sold for $30 million

Year4:  FMV of Investment B determined to be $35 million

Year5:  Investment B sold for $20 million

Thecapital gains incentive fee, if any, would be:

Year1:  None

Year2:  $5 million capital gains incentive fee — 20% multiplied by $25 million ($30 million realized capitalgains on Investment A less unrealized capital depreciation on Investment B)

Year3:  $1.4 million capital gains incentive fee ⁽¹⁾ — $6.4 million (20% multiplied by $32 million($35 million cumulative realized capital gains less $3 million unrealized capital depreciation)) less $5 million capital gainsincentive fee received in Year 2

Year4:  None

Year5:  None — $5 million (20% multiplied by $25 million (cumulative realized capital gains of $35 millionless realized capital losses of $10 million)) less $6.4 million cumulative capital gains incentive fee paid in Year 2 and Year3 ⁽²⁾

Paymentof Our Expenses

Allinvestment professionals of MC Advisors and/or its affiliates, when and to the extent engaged in providing investment advisoryand management services to us, and the compensation and routine overhead expenses of personnel allocable to these services tous, are provided and paid for by MC Advisors and not by us. We bear all other out-of-pocket costs and expenses of our operationsand transactions, including, without limitation:

Durationand Termination

Unlessterminated earlier as described below, the Investment Advisory and Management Agreement will continue in effect from year to yearif approved annually by our Board or by the affirmative vote of the holders of a majority of our outstanding voting securities,and, in either case, if also approved by a majority of our directors who are not “interested persons.” The InvestmentAdvisory and Management Agreement automatically terminates in the event of its assignment, as defined in the 1940 Act, by MC Advisorsand may be terminated by either party without penalty upon not less than 60 days’ written notice to the other. The holdersof a majority of our outstanding voting securities may also terminate the Investment Advisory and Management Agreement withoutpenalty. See “Risk Factors — Risks Relating to Our Business and Structure — We depend uponMC Advisors’ senior management for our success, and upon its access to the investment professionals of Monroe Capital andits affiliates” and “Risk Factors — Risks Relating to Our Business and Structure — MCAdvisors can resign on 60 days’ notice, and we may not be able to find a suitable replacement within that time, resultingin a disruption in our operations that could adversely affect our financial condition, business and results of operations.”

Indemnification

TheInvestment Advisory and Management Agreement provides that, absent willful misfeasance, bad faith or gross negligence in the performanceof its duties or by reason of the reckless disregard of its duties and obligations, MC Advisors and its affiliates’ respectiveofficers, directors, members, managers, stockholders and employees are entitled to indemnification from us from and against anyclaims or liabilities, including reasonable legal fees and other expenses reasonably incurred, arising out of or in connectionwith our business and operations or any action taken or omitted on our behalf pursuant to authority granted by the InvestmentAdvisory and Management Agreement, except where attributable to gross negligence, willful misconduct, bad faith or reckless disregardof such person’s duties under the Investment Advisory and Management Agreement.

AdministrationAgreement

Pursuantto an Administration Agreement, MC Management furnishes us with office facilities and equipment and provides us clerical, bookkeepingand record keeping and other administrative services at such facilities. Under the Administration Agreement, MC Management performs,or oversees the performance of, our required administrative services, which include, among other things, being responsible forthe financial records that we are required to maintain and preparing reports to our stockholders and reports filed with the SEC.MC Management also assists us in determining and publishing our net asset value, oversees the preparation and filing of our taxreturns, prints and disseminates reports to our stockholders and generally oversees the payment of our expenses and the performanceof administrative and professional services rendered to us by others. Under the Administration Agreement, MC Management also providesmanagerial assistance on our behalf to those portfolio companies that have accepted our offer to provide such assistance.

Paymentsunder the Administration Agreement are equal to an amount based upon our allocable portion (subject to the review and approvalof our Board) of MC Management’s overhead in performing its obligations under the Administration Agreement, including rentand our allocable portion of the cost of our officers, including our chief financial officer and chief compliance officer andtheir respective staffs. Unless terminated earlier as described below, the Administration Agreement will continue in effect fromyear to year with the approval of our Board. The Administration Agreement may be terminated by either party without penalty upon60 days’ written notice to the other party.

MCManagement may retain third parties to assist in providing administrative services to us. To the extent that MC Management outsourcesany of its functions, we pay the fees associated with such functions on a direct basis without profit to MC Management. We reimburseMC Management for the allocable portion (subject to the review and approval of our Board) of MC Management’s overhead andother expenses incurred by it in performing its obligations under the Administration Agreement, including rent, the fees and expensesassociated with performing compliance functions, and our allocable portion of the cost of our chief financial officer and chiefcompliance officer and their respective staffs. For the years ended December 31, 2020, 2019 and 2018, we incurred $3.3 million,$3.5 million and $3.4 million in administrative expenses (included within Professional fees, Administrative service fees and Generaland administrative expenses on the consolidated statements of operations) under the Administration Agreement, respectively, ofwhich $1.3 million, $1.3 million and $1.3 million, respectively, was related to MC Management overhead and salary allocation andpaid directly to MC Management.

Indemnification

TheAdministration Agreement provides that, absent willful misfeasance, bad faith or gross negligence in the performance of its dutiesor by reason of the reckless disregard of its duties and obligations, MC Management and its affiliates’ respective officers,directors, members, managers, stockholders and employees are entitled to indemnification from us from and against any claims orliabilities, including reasonable legal fees and other expenses reasonably incurred, arising out of or in connection with ourbusiness and operations or any action taken or omitted on our behalf pursuant to authority granted by the Administration Agreement,except where attributable to gross negligence, willful misconduct, bad faith or reckless disregard of such person’s dutiesunder the Administration Agreement.

LicenseAgreement

Wehave entered into a license agreement with Monroe Capital under which Monroe Capital has agreed to grant us a non-exclusive, royalty-freelicense to use the name “Monroe Capital.” Under this agreement, we have a right to use the “Monroe Capital”name for so long as MC Advisors or one of its affiliates remains our investment advisor. Other than with respect to this limitedlicense, we have no legal right to the “Monroe Capital” name. This license agreement will remain in effect for solong as the Investment Advisory and Management Agreement with MC Advisors is in effect.

StaffingAgreement

Wedo not have any internal employees. We depend on the diligence, skill and network of business contacts of the senior investmentprofessionals of MC Advisors to achieve our investment objective. MC Advisors is an affiliate of Monroe Capital and depends uponaccess to the investment professionals and other resources of Monroe Capital and Monroe Capital’s affiliates to fulfillits obligations to us under the Investment Advisory and Management Agreement. MC Advisors also depends upon Monroe Capital toobtain access to deal flow generated by the professionals of Monroe Capital and its affiliates. Under the Staffing Agreement,MC Management provides MC Advisors with the resources necessary to fulfill these obligations. The Staffing Agreement providesthat MC Management will make available to MC Advisors experienced investment professionals and access to the senior investmentpersonnel of Monroe Capital for purposes of evaluating, negotiating, structuring, closing and monitoring our investments. TheStaffing Agreement also includes a commitment that the members of MC Advisors’ investment committee serve in such capacity.The Staffing Agreement remains in effect until terminated and may be terminated by either party without penalty upon 60 days’written notice to the other party. Services under the Staffing Agreement are provided to MC Advisors on a direct cost reimbursementbasis, and such fees are not our obligation.

BoardApproval of the Investment Advisory and Management Agreement and Staffing Agreement

Ata meeting of our Board held on July 30, 2020, our Board, including directors who are not “interested persons” as definedin the 1940 Act, voted unanimously to approve and continue the Investment Advisory and Management Agreement for another annualperiod in accordance with the requirements of the 1940 Act. The approval included consideration and approval of the specific individualsprovided through the Staffing Agreement between MC Advisors and MC Management that comprise our investment committee. In reachinga decision to approve and continue the investment advisory agreement and investment committee, the Board reviewed a significantamount of information and considered, among other things:

Basedon the information reviewed and the discussions detailed above, our Board, including all of the directors who are not “interestedpersons” as defined in the 1940 Act, concluded that the investment advisory fee rates and terms are fair and reasonablein relation to the services provided and approved the investment advisory agreement and its continuation as being in the bestinterests of our stockholders. MC Advisors bears all expenses related to the services and personnel provided pursuant to the StaffingAgreement.

VALUATIONPROCESS AND DETERMINATION OF NET ASSET VALUE

Thenet asset value per share of our outstanding shares of common stock is determined quarterly by dividing the value of total assetsminus liabilities by the total number of shares outstanding. We calculate the value of our total assets in accordance with thefollowing procedures.

Investmentsfor which market quotations are readily available and within a recent date are valued at such market quotations. We may also obtainindicative prices with respect to certain of our investments from pricing services or brokers or dealers in order to value suchinvestments. We expect that there will not be a readily available market value within a recent date for many of our investments;those debt and equity securities that are not publicly traded or whose market prices are not readily available are valued at fairvalue as determined in good faith by our Board using a documented valuation policy and a consistently applied valuation process.

OurBoard is ultimately and solely responsible for determining the fair value of the portfolio investments that are not publicly traded,whose market prices are not readily available on a quarterly basis in good faith or any other situation where portfolio investmentsrequire a fair value determination.

Withrespect to investments for which market quotations are not readily available, our Board undertakes a multi-step valuation processeach quarter, as described below:

Thevaluation technique utilized in the determination of fair value is affected by a wide variety of factors including the type ofinvestment, whether the investment is new and not yet established in the marketplace, and other characteristics particular tothe transaction. Our Board generally uses the income approach to determine fair value for loans where market quotations arenot readily available, as long as it is appropriate. If there is deterioration in credit quality or a debt investment is in workoutstatus, we may consider other factors in determining the fair value, including the value attributable to the debt investment fromthe enterprise value of the portfolio company or the proceeds that would be received in a liquidation analysis. This liquidationanalysis may also include probability weighting of alternative outcomes. We generally consider our debt to be performing if theborrower is not in default, the borrower is remitting payments in a timely manner, the loan is in covenant compliance and theloan is otherwise not deemed to be impaired. In determining the fair value of the performing debt, we consider fluctuations incurrent interest rates, the trends in yields of debt instruments with similar credit ratings, financial condition of the borrower,economic conditions and other relevant factors, both qualitative and quantitative. In the event that a debt instrument is notperforming, as defined above, we will evaluate the value of the collateral utilizing the same framework described above for aperforming loan to determine the value of the debt instrument. See Note 4 to the accompanying consolidated financial statementsfor additional information on the determination of fair value.

Wereport our investments at fair value with changes in value reported through our consolidated statements of operations under thecaption “unrealized gain (loss).” In determining fair value, we are required to assume that portfolio investmentsare to be sold in the principal market to market participants, or in the absence of a principal market, the most advantageousmarket, which may be a hypothetical market. Market participants are defined as buyers and sellers in the principal or most advantageousmarket that are independent, knowledgeable, and willing and able to transact. The market in which we can exit portfolio investmentswith the greatest volume and level activity is considered our principal market.

Determinationof fair value involves subjective judgments and estimates. Accordingly, the notes to our consolidated financial statements expressthe uncertainty with respect to the possible effect of such valuations, and any change in such valuations, on our consolidatedfinancial statements.

COMPETITION

Wecompete with a number of specialty and commercial finance companies to make the types of investments that we make in middle-marketcompanies, including BDCs, traditional commercial banks, private investment funds, regional banking institutions, small businessinvestment companies, investment banks and insurance companies. Additionally, with increased competition for investment opportunities,alternative investment vehicles such as hedge funds may invest in areas they have not traditionally invested in or from whichthey had withdrawn during the recent economic downturn, including investing in middle-market companies. As a result, competitionfor investments in lower middle-market companies has intensified, and we expect that trend to continue. Many of our existing andpotential competitors are substantially larger and have considerably greater financial, technical and marketing resources thanwe do. For example, some competitors may have a lower cost of funds and access to funding sources that are not available to us.In addition, some of our competitors may have higher risk tolerances or different risk assessments, which could allow them toconsider a wider variety of investments and establish more relationships than us.

Weuse the expertise of the investment professionals of MC Advisors to assess investment risks and determine appropriate pricingand terms for investments in our loan portfolio. In addition, we expect that the relationships of the senior professionals ofMC Advisors will enable us to learn about, and compete effectively for, investment opportunities with attractive middle-marketcompanies, independently or in conjunction with the private equity clients of MC Advisors. For additional information concerningthe competitive risks we face, see “Risk Factors — Risks Relating to Our Business and Structure —We operate in a highly competitive market for investment opportunities, which could reduce returns and result in losses.”

INFORMATIONTECHNOLOGY

Weutilize a number of industry standard practices and software packages to secure, protect, manage and back up all corporate data.We outsource portions of our information technology function to efficiently monitor and maintain our systems. Also, we conducta daily backup of our systems to ensure the security and stability of the network.

ELECTIONTO BE TAXED AS A RIC

Asa BDC, we have elected to be treated as a RIC under Subchapter M of the Code. As a RIC, we generally do not have to pay corporate-levelU.S. federal income taxes on any ordinary income or capital gains that we timely distribute to our stockholders as dividends.To continue to qualify as a RIC, we must, among other things, meet certain source-of income and asset diversification requirements(as described below). In addition, we must distribute to our stockholders, for each taxable year, at least 90% of our “investmentcompany taxable income,” which is generally our net ordinary income plus the excess of realized net short-term capital gainsover realized net long-term capital losses (the “Annual Distribution Requirement”). Generally, we would expect thesedistributions to be taxable to our stockholders as ordinary income and not to be eligible for the reduced maximum tax rates associatedwith qualified dividends.

TAXATIONAS A RIC

Ifwe continue to:

thenwe will not be subject to U.S. federal income tax on the portion of our investment company taxable income and net capital gains,defined as net long-term capital gains in excess of net short-term capital losses we distribute to our stockholders.

Wewill be subject to U.S. federal income tax at the regular corporate rates on any net income or net capital gain not distributed(or deemed distributed) to our stockholders.

Wewill be subject to a 4% nondeductible federal excise tax on our undistributed income unless we distribute in a timely manner anamount at least equal to the sum of (a) 98% of our ordinary income for each calendar year, (b) 98.2% of our capital gain net income(both long-term and short-term) for the one-year period ending October 31 in that calendar year and (c) any income realized, butnot distributed, in the preceding years (the “Excise Tax Avoidance Requirement”). For this purpose, however, any ordinaryincome or capital gain net income retained by us that is subject to corporate income tax for the tax year ending in that calendaryear will be considered to have been distributed by year end. For the years ended December 31, 2020, 2019 and 2018, we recorded$0.4 million, $10 thousand and $11 thousand on our consolidated statements of operations for U.S. federal excise taxes.

Inorder to qualify as a RIC for U.S. federal income tax purposes, we must, among other things:

Tothe extent that we invest in entities treated as partnerships for U.S. federal income tax purposes (other than a “qualifiedpublicly traded partnership”), we generally must include the items of gross income derived by the partnerships for purposesof the 90% Income Test, and the income that is derived from a partnership (other than a “qualified publicly traded partnership”)will be treated as qualifying income for purposes of the 90% Income Test only to the extent that such income is attributable toitems of income of the partnership which would be qualifying income if realized by us directly. In addition, we generally musttake into account our proportionate share of the assets held by partnerships (other than a “qualified publicly traded partnership”)in which we are a partner for purposes of the Diversification Tests.

Inorder to prevent our receipt of income that would not satisfy the 90% Income Test, we have established and may establishadditional special purpose corporations to hold assets from which we do not anticipate earning dividend, interest or otherqualifying income under the 90% Income Test. Any investments held through a special purpose corporation would generally besubject to U.S. federal income taxes and other taxes, and therefore would be expected to achieve a reduced after-taxyield.

Wemay be required to recognize taxable income in circumstances in which we do not receive a corresponding payment in cash. Forexample, for debt obligations that are treated under applicable tax rules as having original issue discount (such as debtinstruments with PIK interest or, in certain cases, increasing interest rates or issued with warrants), we must include inincome each year a portion of the original issue discount that accrues over the life of the obligation, regardless of whethercash representing such income is received by us in the same taxable year. We may also have to include in our income otheramounts that we have not yet received in cash, such as deferred loan origination fees that are paid after origination of theloan or are paid in non-cash compensation such as warrants or stock. We anticipate that a portion of our income will continueto constitute original issue discount or other income required to be included in taxable income prior to receipt ofcash.

Becauseany original issue discount or other amounts accrued are included in our investment company taxable income in the year ofthe accrual, we may be required to make a distribution to our stockholders in order to satisfy the Annual Distribution Requirement,even though we will not have received the corresponding cash amount. As a result, we may have difficulty meeting the Annual DistributionRequirement. We may have to sell some of our investments at times and/or at prices we do not consider advantageous, raise additionaldebt or equity capital or forgo new investment opportunities for this purpose. If we are not able to obtain cash from other sources,we may fail to qualify for RIC tax treatment and thus become subject to corporate-level U.S. federal income tax.

Gainor loss realized from warrants as well as any loss attributable to the lapse of such warrants generally will betreated as capital gain or loss. Such gain or loss generally will be long-term or short-term, depending on how long we held aparticular warrant.

Ourinvestments in non-U.S. securities may be subject to non-U.S. income, withholding and other taxes. In that case, our yield onthose securities would be decreased. Stockholders will generally not be entitled to claim a credit or deduction with respect tonon-U.S. taxes paid by us.

Ifwe purchase shares in a “passive foreign investment company” (a “PFIC”), we may be subject to U.S. federalincome tax on a portion of any “excess distribution” or gain from the disposition of such shares even if such incomeis distributed as a taxable dividend by us to our stockholders. Additional charges in the nature of interest may be imposed onus in respect of deferred taxes arising from such distributions or gains. If we invest in a PFIC and elect to treat the PFIC asa “qualified electing fund” (a “QEF”), under the Code, in lieu of the foregoing requirements, we willbe required to include in income each year a portion of the ordinary earnings and net capital gain of the QEF, even if such incomeis not distributed to us. Alternatively, we can elect to mark-to-market at the end of each taxable year our shares in a PFIC;in that case, we will recognize as ordinary income any increase in the value of such shares and as ordinary loss any decreasein such value to the extent it does not exceed prior increases included in income. Under either election, we may be required torecognize in a year income in excess of our distributions from PFICs and our proceeds from dispositions of PFIC stock during thatyear, and such income will be taken into account for purposes of the Annual Distribution Requirement and the 4% federal excisetax.

UnderSection 988 of the Code, gain or loss attributable to fluctuations in exchange rates between the time we accrue income, expenses,or other liabilities denominated in a foreign currency and the time we actually collect such income or pay such expenses or liabilitiesis generally treated as ordinary income or loss. Similarly, gain or loss on foreign currency forward contracts and the dispositionof debt denominated in a foreign currency, to the extent attributable to fluctuations in exchange rates between the acquisitionand disposition dates, are also treated as ordinary income or loss.

Throughour use of leverage, we are subject to certain financial covenants that could limit our ability to make distributions to our stockholders.In addition, under the 1940 Act, we are not permitted to make distributions to our stockholders while our debt obligations andother senior securities are outstanding unless certain “asset coverage” tests are met. If we are unable to make sufficientdistributions to satisfy the Annual Distribution Requirement, we may fail to qualify as a RIC.

Althoughwe do not expect to do so, we are authorized (subject to our financial covenants and 1940 Act asset coverage tests) to borrowfunds and to sell assets in order to satisfy the Annual Distribution Requirement and to eliminate or minimize our liabilityfor U.S. federal income tax and the 4% federal excise tax. However, our ability to dispose of assets to make distributionsmay be limited by (1) the illiquid nature of our portfolio and/or (2) other requirements relating to our status as a RIC,including the Diversification Tests. If we dispose of assets in order to meet the Annual Distribution Requirement or to avoidthe 4% federal excise tax, we may make such dispositions at times that, from an investment standpoint, are notadvantageous.

Ifwe fail to satisfy the Annual Distribution Requirement or otherwise fail to qualify as a RIC in any taxable year, and certainrelief provisions are not available, we will be subject to tax in that year on all of our taxable income, regardless of whetherwe make any distributions to our stockholders. In that case, all of such income will be subject to corporate-level U.S. federalincome tax, reducing the amount available to be distributed to our stockholders. See “Failure to Qualify as a RIC”below for more information.

Asa RIC, we are not allowed to carry forward or carry back a net operating loss for purposes of computing our investment companytaxable income in other taxable years. We generally are permitted to carry forward for an indefinite period any capital lossesnot used to offset capital gains. However, future transactions that we engage in may cause our ability to use any capital losscarry forwards, and unrealized losses once realized, to be limited under Section 382 of the Code.

Certainof our investment practices may be subject to special and complex U.S. federal income tax provisions that may, among other things:(i) disallow, suspend or otherwise limit the allowance of certain losses or deductions; (ii) convert lower taxed long-term capitalgain and qualified dividend income into higher taxed short-term capital gain or ordinary income; (iii) convert an ordinary lossor a deduction into a capital loss (the deductibility of which is more limited); (iv) cause us to recognize income or gain withouta corresponding receipt of cash; (v) adversely affect the time as to when a purchase or sale of stock or securities is deemedto occur; (vi) adversely alter the characterization of certain complex financial transactions; and (vii) produce income that willnot be qualifying income for purposes of the 90% Income Test described above. We will monitor our transactions and may make certaintax decisions in order to mitigate the potential adverse effects of these provisions.

Asdescribed above, to the extent that we invest in equity securities of entities that are treated as partnerships for U.S. federalincome tax purposes, the effect of such investments for purposes of the 90% Income Test and the Diversification Tests will dependon whether or not the partnership is a “qualified publicly traded partnership” (as defined in the Code). If the partnershipis a “qualified publicly traded partnership,” the net income derived from such investments will be qualifying incomefor purposes of the 90% Income Test and will be “securities” for purposes of the Diversification Tests. If the partnership,however, is not treated as a “qualified publicly traded partnership,” then the consequences of an investment in thepartnership will depend upon the amount and type of income and assets of the partnership allocable to us. The income derived fromsuch investments may not be qualifying income for purposes of the 90% Income Test and, therefore, could adversely affect our qualificationas a RIC. We intend to monitor our investments in equity securities of entities that are treated as partnerships for U.S. federalincome tax purposes to prevent our disqualification as a RIC.

FAILURETO QUALIFY AS A RIC

Ifwe fail the 90% Income Test or the Diversification Tests for any taxable year or quarter of such taxable year, we may neverthelesscontinue to qualify as a RIC for such year if certain relief provisions of the Code apply (which, among other things may requireus to pay certain corporate-level federal taxes or to dispose of certain assets). If we are unable to qualify for treatment asa RIC and are unable to cure the failure, we would be subject to U.S. federal income tax on all of our taxable income at regularcorporate rates. We would not be able to deduct distributions to our stockholders, nor would they be required to be made. In theevent of such a failure to qualify, distributions, including distributions of net long-term capital gain, would generally be taxableto our stockholders as ordinary dividend income to the extent of our current and accumulated earnings and profits. Subject tocertain limitations under the Code, our corporate stockholders would be eligible to claim a dividend received deduction with respectto such dividend; our non-corporate stockholders would generally be able to treat such dividends as “qualified dividendincome,” which is subject to reduced rates of U.S. federal income tax. Distributions in excess of our current and accumulatedearnings and profits would be treated first as a return of capital to the extent of the stockholder’s tax basis, and anyremaining distributions would be treated as a capital gain. In order to qualify as a RIC, in addition to the other requirementsdiscussed above, we would be required to distribute all of our previously undistributed earnings and profits attributable to anyperiod prior to us becoming a RIC by the end of the first year that we intend to qualify as a RIC. To the extent that we haveany net built-in gains in our assets (i.e., the excess of the aggregate gains, including items of income, over aggregate lossesthat would have been realized with respect to such assets if we had been liquidated) as of the beginning of the first year thatwe qualify as a RIC, we would be subject to a corporate-level U.S. federal income tax on such built-in gains if and when recognizedover the next ten years (or shorter applicable period). Alternatively, we may choose to recognize such built-in gains immediatelyprior to our qualification as a RIC.

Ifwe have previously qualified as a RIC, but are subsequently unableto qualify for treatment as a RIC, and certain amelioration provisions are not applicable, we would be subject to tax on all ofour taxable income (including our net capital gains) at regular corporate rates. We would not be able to deduct distributionsto our stockholders, nor would they be required to be made. Distributions, including distributions of net long-term capital gain,would generally be taxable to our stockholders as ordinary dividend income to the extent of our current and accumulated earningsand profits. Subject to certain limitations under the Code, our corporate stockholders would be eligible to claim a dividend receiveddeduction with respect to such dividend; our non-corporate stockholders would generally be able to treat such dividends as “qualifieddividend income,” which is subject to reduced rates of U.S. federal income tax. Distributions in excess of our current andaccumulated earnings and profits would be treated first as a return of capital to the extent of the stockholder’s tax basis,and any remaining distributions would be treated as a capital gain. In order to requalify as a RIC, in addition to the other requirementsdiscussed above, we would be required to distribute all of our previously undistributed earnings attributable to the period wefailed to qualify as a RIC by the end of the first year that we intend to requalify as a RIC. If we fail to requalify as a RICfor a period greater than two taxable years, we may be subject to regular corporate tax on any net built-in gains with respectto certain of our assets ( i.e. , the excess of the aggregate gains, including items of income, over aggregate losses thatwould have been realized with respect to such assets if we had been liquidated) that we elect to recognize on requalificationor when recognized over the next five years.

REGULATION

Weare a BDC under the 1940 Act and have elected to be treated as a RIC under the Code. The 1940 Act contains prohibitions and restrictionsrelating to transactions between BDCs and their affiliates (including any investment advisors), principal underwriters and affiliatesof those affiliates or underwriters and requires that a majority of the directors of a BDC be persons other than “interestedpersons,” as that term is defined in the 1940 Act. In addition, the 1940 Act provides that we may not change the natureof our business so as to cease to be, or to withdraw our election as, a BDC unless approved by a majority of our outstanding votingsecurities.

Wemay invest up to 100% of our assets in securities acquired directly from issuers in privately negotiated transactions. With respectto such securities, we may, for the purpose of public resale, be deemed an “underwriter” as that term is defined inthe Securities Act. Our intention is to not write (sell) or buy put or call options to manage risks associated with the publiclytraded securities of our portfolio companies, except that we may enter into hedging transactions to manage the risks associatedwith interest rate fluctuations. However, we may purchase or otherwise receive warrants to purchase the common stock of our portfoliocompanies in connection with acquisition financing or other investments. Similarly, in connection with an acquisition, we mayacquire rights to require the issuers of acquired securities or their affiliates to repurchase them under certain circumstances.We also do not intend to acquire securities issued by any investment company that exceed the limits imposed by the 1940 Act. Underthese limits, we generally cannot acquire more than 3% of the total outstanding voting stock of any registered investment company,invest more than 5% of the value of our total assets in the securities of one investment company or invest, in the aggregate,more than 10% of the value of our total assets in the securities of more than one investment company. With regard to that portionof our portfolio invested in securities issued by investment companies, it should be noted that such investments might subjectour stockholders to additional expenses. None of these policies are fundamental and may be changed to the extent permitted bylaw without stockholder approval.

TheSBIC license allows our subsidiary, MRCC SBIC, to obtain leverage by issuing SBA debentures, subject to the issuance of a leveragecommitment by the SBA and other customary procedures. SBA debentures are non-recourse, interest only debentures with interestpayable semi-annually and a 10-year maturity. The principal amount of SBA debentures is not required to be paid prior tomaturity but may be prepaid at any time without penalty. The interest rate of SBA debentures is fixed on a semi-annual basis (poolingdate) at a market-driven spread over U.S. Treasury Notes with 10-year maturities. The SBA, as a creditor, has a superior claimto MRCC SBIC’s assets over our stockholders in the event we liquidate MRCC SBIC or the SBA exercises its remedies underthe SBA debentures issued to MRCC SBIC upon an event of default.

SBICsare designed to stimulate the flow of private equity capital to eligible small businesses. Under SBA regulations, SBICs may makeloans to eligible small businesses and invest in the equity securities of small businesses. Under present SBA regulations, eligiblesmall businesses include businesses that have a tangible net worth not exceeding $19.5 million and have average after tax netincome not exceeding $6.5 million for the two most recent fiscal years. In addition, an SBIC must devote 25% of its investmentactivity to “smaller” concerns as defined by the SBA. A smaller concern is one that has a tangible net worth not exceeding$6.0 million and has average after tax net income not exceeding $2.0 million for the two most recent fiscal years. SBA regulationsalso provide alternative size standard criteria to determine eligibility, which depends on the industry in which the businessis engaged and are based on such factors as the number of employees and gross sales. According to SBA regulations, SBICs may makelong-term loans to small businesses, invest in the equity securities of such businesses and provide them with consulting and advisoryservices.

SBAregulations currently limit the amount that an individual SBIC may borrow to a maximum of $175.0 million when it has at least$87.5 million in regulatory capital, receives a leverage commitment from the SBA and has been through an audit examination bythe SBA subsequent to licensing. The SBA also limits a related group of SBICs (commonly referred to as a “familyof funds”) to a maximum of $350.0 million in total borrowings.

OnOctober 2, 2014, we received exemptive relief from the SEC to permit us to exclude the debt of MRCC SBIC guaranteed by the SBAfrom the asset coverage test under the 1940 Act. The exemptive relief provides us with increased flexibility under the asset coveragetest by permitting us to borrow, through MRCC SBIC, more than we would otherwise be able to absent the receipt of this exemptiverelief. This provides us with increased investment flexibility but also increases our risks related to leverage. For a discussionof the risks associated with leverage, see “Risk Factors — Risks Relating to Our Business and Structure — Regulationsgoverning our operation as a BDC affect our ability to and the way in which we raise additional capital” and “RiskFactors — Risks Relating to Our Business and Structure — We maintain a revolving credit facility and use other borrowedfunds to make investments or fund our business operations, which exposes us to risks typically associated with leverage and increasesthe risk of investing in us.”

TheSBA restricts the ability of SBICs to repurchase their capital stock. SBA regulations also include restrictions on a “changeof control” or transfer of an SBIC and require that SBICs invest idle funds in accordance with SBA regulations. In addition,our current and any future SBIC subsidiaries may also be limited in their ability to make distributions to us if they do not havesufficient capital, in accordance with SBA regulations.

MRCCSBIC is subject to regulation and oversight by the SBA, including requirements with respect to maintaining certain minimum financialratios and other covenants. Receipt of a SBIC license does not assure that MRCC SBIC will receive additional SBA debenture funding,which is dependent upon MRCC SBIC’s continuing to be in compliance with SBA regulations and policies.

QUALIFYINGASSETS

Underthe 1940 Act, a BDC may not acquire any asset other than assets of the type listed in Section 55(a) of the 1940 Act, which arereferred to as “qualifying assets,” unless, at the time the acquisition is made, qualifying assets represent at least70% of the company’s total assets. The principal categories of qualifying assets relevant to our business are the following:

Theregulations defining qualifying assets may change over time. We may adjust our investment focus as needed to comply with and/ortake advantage of any regulatory, legislative, administrative or judicial actions in this area. Investments in the securitiesof companies domiciled in or with their principal places of business outside of the United States, are not qualifying assets.In accordance with Section 55(a) of the 1940 Act, we cannot invest more than 30% of our assets in non-qualifying assets.

MANAGERIALASSISTANCE TO PORTFOLIO COMPANIES

ABDC must have been organized and have its principal place of business in the United States and must be operated for the purposeof making investments in the types of securities described above. However, in order to count portfolio securities as qualifyingassets for the purpose of the 70% test, a BDC must either control the issuer of securities or must offer to make available tothe issuer of the securities significant managerial assistance. However, when a BDC purchases securities in conjunction with oneor more other persons acting together, one of the other persons in the group may make available such managerial assistance. Makingavailable managerial assistance means, among other things, any arrangement whereby the BDC, through its directors, officers, employeesor agents offers to provide, and, if accepted, does so provide, significant guidance and counsel concerning the management, operationsor business objectives and policies of a portfolio company through monitoring of portfolio company operations, selective participationin board and management meetings, consulting with and advising a portfolio company’s officers or other organizational orfinancial guidance. MC Advisors or its affiliates provide such managerial assistance on our behalf to portfolio companies thatrequest this assistance.

TEMPORARYINVESTMENTS

Pendinginvestments in other types of qualifying assets, as described above, our investments may consist of cash, cash equivalents, U.S.government securities and high-quality debt investments that mature in one year or less from the date of investment, which werefer to, collectively, as temporary investments, so that 70% of our assets are qualifying assets or temporary investments. Wemay invest in U.S. Treasury bills or in repurchase agreements, so long as the agreements are fully collateralized by cash or securitiesissued by the U.S. government or its agencies. A repurchase agreement involves the purchase by an investor, such as us, of a specifiedsecurity and the simultaneous agreement by the seller to repurchase it at an agreed-upon future date and at a price that is greaterthan the purchase price by an amount that reflects an agreed-upon interest rate. There is no percentage restriction on the proportionof our assets that may be invested in such repurchase agreements. However, if more than 25% of our total assets constitute repurchaseagreements from a single counterparty, we would not meet the Diversification Tests in order to qualify as a RIC for U.S. federalincome tax purposes. Accordingly, we do not intend to enter into repurchase agreements with a single counterparty in excess ofthis limit. MC Advisors monitors the creditworthiness of the counterparties with which we enter into repurchase agreement transactions.

SENIORSECURITIES

Weare generally permitted, under specified conditions, to issue multiple classes of indebtedness and one class of stock senior toour common stock if our asset coverage, as defined in the 1940 Act, is at least equal to 150% immediately after each such issuance.In addition, while any senior securities remain outstanding, we must make provisions to prohibit any distribution to our stockholdersor the repurchase of such securities or shares unless we meet the applicable asset coverage ratios at the time of the distributionor repurchase. We may also borrow amounts up to 5% of the value of our total assets for temporary or emergency purposes withoutregard to asset coverage. We consolidate our financial results with all of our wholly-owned subsidiaries, including MRCC SBIC,for financial reporting purposes and measure our compliance with the leverage test applicable to BDCs under the 1940 Act on aconsolidated basis. On October 2, 2014, we received exemptive relief from the SEC to permit us to exclude the debt of our SBICsubsidiaries from our asset coverage test under the 1940 Act. As such, our ratio of total consolidated assets to outstanding indebtednessmay be less than 150%. This provides us with increased investment flexibility but also increases our risks related to leverage.For a discussion of the risks associated with leverage, see “Risk Factors — Risks Relating to Our Business and Structure — Regulations governing our operation as a BDC affect our ability to and the way in which we raise additional capital”and “Risk Factors — Risks Relating to Our Business and Structure — We maintain a revolving credit facility anduse other borrowed funds to make investments or fund our business operations, which exposes us to risks typically associated withleverage and increases the risk of investing in us.”

CODESOF ETHICS

Weand MC Advisors have each adopted a code of ethics pursuant to Rule 17j-1 under the 1940 Act that establishes procedures for personalinvestments and restricts certain personal securities transactions. Personnel subject to each code may invest in securities fortheir personal investment accounts, including securities that may be purchased or held by us, so long as such investments aremade in accordance with the code’s requirements. You may access our code of ethics on our website at www.monroebdc.com. The date and substance of amendments to the code, if any, are noted on the cover page of the code of ethics. In addition,each code of ethics is attached as an exhibit to our registration statement and is available on the EDGAR Database on the SEC’swebsite at www.sec.gov. You may also obtain copies of each code of ethics, after paying a duplicating fee, by electronicrequest at the following e-mail address: publicinfo@sec.gov.

PROXYVOTING POLICIES AND PROCEDURES

Wehave delegated our proxy voting responsibility to MC Advisors. The proxy voting policies and procedures of MC Advisors are setout below. The guidelines are reviewed periodically by MC Advisors and our directors who are not “interested persons,”and, accordingly, are subject to change. For purposes of these proxy voting policies and procedures described below, “we,” “our” and “us” refer to MC Advisors.

Introduction

Asan investment advisor registered under the Advisers Act, we have a fiduciary duty to act solely in the best interests of our clients.As part of this duty, we recognize that we must vote client securities in a timely manner free of conflicts of interest and inthe best interests of our clients.

Thesepolicies and procedures for voting proxies for our investment advisory clients are intended to comply with Section 206 of, andRule 206(4)-6 under, the Advisers Act.

ProxyPolicies

Wevote proxies relating to our portfolio securities in what we perceive to be the best interest of our clients’ stockholders.We review on a case-by-case basis each proposal submitted to a stockholder vote to determine its effect on the portfolio securitiesheld by our clients. In most cases we will vote in favor of proposals that we believe are likely to increase the value of theportfolio securities held by our clients. Although we will generally vote against proposals that may have a negative effect onour clients’ portfolio securities, we may vote for such a proposal if there exist compelling long-term reasons to do so.

Ourproxy voting decisions are made by those senior officers who are responsible for monitoring each of our clients’ investments.To ensure that our vote is not the product of a conflict of interest, we require that (a) anyone involved in the decision-makingprocess disclose to our chief compliance officer any potential conflict that he or she is aware of and any contact that he orshe has had with any interested party regarding a proxy vote and (b) employees involved in the decision making process or voteadministration are prohibited from revealing how we intend to vote on a proposal in order to reduce any attempted influence frominterested parties. Where conflicts of interest may be present, we will disclose such conflicts to our client, including thosedirectors who are not interested persons and we may request guidance from such persons on how to vote such proxies for their account.

ProxyVoting Records

Youmay obtain information about how we voted proxies for Monroe Capital Corporation by making a written request for proxy votinginformation to: Monroe Capital Corporation, 311 South Wacker Drive, Suite 6400, Chicago, Illinois 60606, Attention: Chief ComplianceOfficer, or by calling Monroe Capital Corporation at (312) 258-8300. The SEC also maintains a website at www.sec.gov thatcontains such information.

COMPLIANCEPOLICIES AND PROCEDURES

Weand MC Advisors have adopted and implemented written policies and procedures reasonably designed to prevent violation of federalsecurities laws and are required to review these compliance policies and procedures annually for their adequacy and the effectivenessof their implementation. Our chief compliance officer is responsible for administering these policies and procedures.

PRIVACYPRINCIPLES

Weare committed to maintaining the privacy of our stockholders and to safeguarding their nonpublic personal information. The followinginformation is provided to help you understand what personal information we collect, how we protect that information and why,in certain cases, we may share information with select other parties.

Generally,we do not receive any nonpublic personal information relating to our stockholders, although certain nonpublic personal informationof our stockholders may become available to us. We do not disclose any nonpublic personal information about our stockholders orformer stockholders to anyone, except as permitted by law or as is necessary in order to service stockholder accounts (for example,to a transfer agent or third-party administrator).

Werestrict access to nonpublic personal information about our stockholders to employees of MC Management and its affiliates witha legitimate business need for the information. We maintain physical, electronic and procedural safeguards designed to protectthe nonpublic personal information of our stockholders.

OTHER

Weare required to provide and maintain a bond issued by a reputable fidelity insurance company to protect us against larceny andembezzlement. Furthermore, as a BDC, we are prohibited from protecting any director or officer against any liability to MonroeCapital Corporation or our stockholders arising from willful misfeasance, bad faith, gross negligence or reckless disregard ofthe duties involved in the conduct of such person’s office.

Weand MC Advisors are each required to adopt and implement written policies and procedures reasonably designed to prevent violationof relevant federal securities laws, obtain approval of the Board of these policies and procedures, review these policies andprocedures annually for their adequacy and the effectiveness of their implementation and designate a chief compliance officerto be responsible for administering the policies and procedures.

Wemay also be prohibited under the 1940 Act from knowingly participating in certain transactions with our affiliates withoutthe prior approval of our Board who are not interested persons and, in some cases, prior approval by the SEC. The SEC hasinterpreted the BDC prohibition on transactions with affiliates to prohibit “joint transactions” among entitiesthat share a common investment advisor. The staff of the SEC has granted no-action relief permitting purchases of a singleclass of privately placed securities provided that the advisor negotiates no term other than price and certain otherconditions are met. Any co-investment would be made subject to compliance with existing regulatory guidance, applicableregulations and our allocation procedures. If opportunities arise that would otherwise be appropriate for us and for anotherfund advised by MC Advisors to invest in different securities of the same issuer, MC Advisors will need to decide which fundwill proceed with the investment. Moreover, except in certain circumstances, we are unable to invest in any issuer in whichanother fund advised by MC Advisors has previously invested.

On October 15, 2014,we, along with MC Advisors and certain other funds and accounts sponsored or managed by MC Advisors and its affiliates,received exemptive relief from the SEC that permits us greater flexibility to negotiate the terms of co-investments if ourBoard determines that it would be advantageous for us to co-invest with other accounts sponsored or managed by MC Advisors orits affiliates in a manner consistent with our investment objectives, positions, policies, strategies and restrictions aswell as regulatory requirements and other pertinent factors. We believe that co-investment by us and accounts sponsored ormanaged by MC Advisors and its affiliates may afford us additional investment opportunities and the ability to achievegreater diversification.

POLICIESAND PROCEDURES FOR MANAGING CONFLICTS

Asof December 31, 2020, affiliates of MC Advisors manage other assets in nine closed-end funds, two small business investment companiesand 20 private funds that also have an investment strategy focused primarily on senior, unitranche and junior secured debt andto a lesser extent, unsecured subordinated debt to lower middle-market companies. In addition, MC Advisors manages our wholly-ownedSBIC subsidiary, MRCC SBIC, as the manager of MRCC SBIC’s general partner, a private BDC, Monroe Capital Income Plus Corporation,and it may manage other entities in the future with an investment focus similar to ours. To the extent that we compete with entitiesmanaged by MC Advisors or any of its affiliates for a particular investment opportunity, MC Advisors will allocate investmentopportunities across the entities for which such opportunities are appropriate, consistent with (a) its internal conflict of interestand allocation policies, (b) the requirements of the Advisers Act and (c) certain restrictions under the 1940 Act and rules thereunderregarding co-investments with affiliates. MC Advisors’ allocation policies are intended to ensure that we may generallyshare equitably with other investment funds or other investment vehicles managed by MC Advisors or its affiliates in investmentopportunities, particularly those involving a security with limited supply or involving differing classes of securities of thesame issuer which may be suitable for us and such other investment funds or other investment vehicles.

MCAdvisors and/or its affiliates may in the future sponsor or manage investment funds, accounts, or other investment vehicles withsimilar or overlapping investment strategies and have put in place a conflict-resolution policy that addresses the co-investmentrestrictions set forth under the 1940 Act. MC Advisors will seek to ensure an equitable allocation of investment opportunitieswhen we are able to invest alongside other accounts managed by MC Advisors and its affiliates. We received exemptive relief fromthe SEC on October 15, 2014 that permits greater flexibility relating to co-investments, subject to certain conditions. When weinvest alongside such other accounts as permitted under the 1940 Act, pursuant to SEC staff interpretation, and pursuant to ourexemptive relief from the SEC that would permit greater flexibility relating to co-investments, such investments will be madeconsistent with such relief and MC Advisors’ allocation policy. Under this allocation policy, a fixed percentage of eachopportunity, which may vary based on asset class and from time to time, will be offered to us and similar eligible accounts, asperiodically determined by MC Advisors and approved by our Board, including a majority of our independent directors. The allocationpolicy provides that allocations among us and other accounts will generally be made pro rata based on each account’s capitalavailable for investment, as determined, in our case, by our Board, including a majority of our independent directors. It is ourpolicy to base our determinations as to the amount of capital available for investment on such factors as the amount of cash onhand, existing commitments and reserves, if any, the targeted leverage level, the targeted asset mix and diversification requirementsand other investment policies and restrictions set by our Board, or imposed by applicable laws, rules, regulations or interpretations.We expect that these determinations will be made similarly for other accounts. In situations where co-investment with other entitiessponsored or managed by MC Advisors or its affiliates is not permitted or appropriate, such as when there is an opportunity toinvest in different securities of the same issuer, MC Advisors will need to decide whether we or such other entity or entitieswill proceed with the investment. MC Advisors will make these determinations based on its policies and procedures which will generallyrequire that such opportunities be offered to eligible accounts on a basis that is fair and equitable over time.

AVAILABLEINFORMATION

Weintend to make this Annual Report on Form 10-K, as well as our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-Kand, if applicable, amendments to those reports filed or furnished pursuant to Section 13(a) of the Exchange Act, publicly availablefree of charge as soon as reasonably practicable following our filing of such reports with the SEC. We maintain a website at www.monroebdc.com and make all of our annual, quarterly and current reports, proxy statements and other publicly filed information available,free of charge, on or through our website. Information contained on our website is not incorporated into this report, and youshould not consider information on our website to be part of this report. You may also obtain such information by contacting usin writing at 311 South Wacker Drive, Suite 6400, Chicago, Illinois 60606, Attention: Investor Relations. The SEC maintains awebsite that contains reports, proxy and information statements and other information we file with the SEC at www.sec.gov.

ITEM1A. RISK FACTORS

Investingin our securities involves a number of significant risks. The risks set out below are not the only risks we face. Additional risksand uncertainties not presently known to us or not presently deemed material by us may also impair our operations and performance.If any of the following events occurs, our business, financial condition and results of operations could be materially and adverselyaffected. In such case, our net asset value and the trading price of our securities could decline, and you may lose all or partof your investment.

RisksRelating to Our Business and Structure

TheCOVID-19 pandemic has caused severe disruptions in the global economy, which has had, and may continue to have, a negative impacton our portfolio companies and our business and operations.

Inlate 2019 and early 2020, COVID-19 emerged in China and spread rapidly to across the world, including to the United States. Thisoutbreak has led and for an unknown period of time will continue to lead to disruptions in local, regional, national and globalmarkets and economies affected thereby. With respect to the U.S. credit markets (in particular for middle market loans), thisoutbreak has resulted in, and until fully resolved is likely to continue to result in, the following among other things: (i) governmentimposition of various forms of “stay at home” orders and the closing of “non-essential” businesses, resultingin significant disruption to the businesses of many middle-market loan borrowers including supply chains, demand and practicalaspects of their operations, as well as in lay-offs of employees, and, while these effects are hoped to be temporary, some effectscould be persistent or even permanent; (ii) increased draws by borrowers on revolving lines of credit; (iii) increasedrequests by borrowers for amendments and waivers of their credit agreements to avoid default, increased defaults by such borrowersand/or increased difficulty in obtaining refinancing at the maturity dates of their loans; (iv) volatility and disruptionof these markets including greater volatility in pricing and spreads and difficulty in valuing loans during periods of increasedvolatility, and liquidity issues; and (v) rapidly evolving proposals and/or actions by state and federal governments to addressproblems being experienced by the markets and by businesses and the economy in general that will not necessarily adequately addressthe problems facing the loan market and middle market businesses. This outbreak is having, and any future outbreaks could have,an adverse impact on our portfolio companies and us and on the markets and the economy in general, and that impact could be material.Such effects will likely continue for the duration of the pandemic, which is uncertain, and for some period thereafter. It isimpossible to determine the scope of the COVID-19 pandemic, or any future outbreaks, how long any such outbreak, market disruptionor uncertainties may last, the effect any governmental actions will have or the full potential impact on us, MC Advisors and ourportfolio companies.

TheCOVID-19 pandemic (including the preventative measures taken in response thereto) has to date (i) created significant businessdisruption issues for certain of our portfolio companies, and (ii) adversely impacted the value and performance of certainof our portfolio companies. The COVID-19 pandemic is continuing as of the filing date of this Annual Report, and its extendedduration may have further adverse impacts on our portfolio companies after December 31, 2020, including for the reasons describedbelow. As a result of this disruption and the pressures on their liquidity, certain of our portfolio companies have been, or maycontinue to be, incentivized to draw on most, if not all, of the unfunded portion of any revolving or delayed draw term loansmade by us, subject to availability under the terms of such loans.

Theeffects described above on our portfolio companies have, for certain of our portfolio companies to date, impacted their abilityto make payments on their loans on a timely basis and in some cases have required us to amend certain terms, including paymentterms. In addition, an extended duration of the COVID-19 pandemic may impact the ability of our portfolio companies to continuemaking their loan payments on a timely basis or meeting their loan covenants. The inability of portfolio companies to make timelypayments or meet loan covenants may in the future require us to undertake similar amendment actions with respect to other of ourinvestments or to restructure our investments. The amendment or restructuring of our investments may include the need for us tomake additional investments in our portfolio companies (including debt or equity investments) beyond any existing commitments,exchange debt for equity, or change the payment terms of our investments to permit a portfolio company to pay a portion of itsinterest through payment-in-kind, which would defer the cash collection of such interest and add it to the principal balance,which would generally be due upon repayment of the outstanding principal.

Ifthe economy is unable to substantially reopen, and high levels of unemployment continue for an extended period of time, loan delinquencies,loan non-accruals, problem assets, and bankruptcies may increase. In addition, collateral for our loans may decline in value,which could cause loan losses to increase and the net worth and liquidity of loan guarantors could decline, impairing their abilityto honor commitments to us. An increase in loan delinquencies and non-accruals or a decrease in loan collateral and guarantornet worth could result in increased costs and reduced income, which would have a material adverse effect on our business, financialcondition or results of operations.

TheCOVID-19 pandemic has adversely impacted the fair value of our investments as of December 31, 2020 and the values assigned asof this date may differ materially from the values that we may ultimately realize with respect to our investments. Our Board approvedthe fair value of our investment portfolio as of December 31, 2020 and these valuations were determined in good faith in accordancewith our valuation policy based on information known or knowable as of the valuation date. As a result, the long term impactsof the COVID-19 pandemic may not yet be fully reflected in the valuation of our investments and the fair value of our portfolioinvestments may be further negatively impacted after December 31, 2020 by circumstances and events that are not yet known, includingthe complete or continuing impact of the COVID-19 pandemic and the resulting measures taken in response thereto. In addition,write downs in the value of our investments have reduced, and any additional write downs may further reduce, our net asset value(and, as a result, our asset coverage calculation). Accordingly, we may continue to incur additional net unrealized losses ormay incur realized losses after December 31, 2020, which could have a material adverse effect on our business, financial conditionand results of operations.

Thevolatility and disruption to the global economy from the COVID-19 pandemic has affected, and may continue to affect,the pace of our investment activity, which may have a material adverse impact on our results of operations. Such volatility anddisruption have also led to the increased credit spreads in the private debt capital markets.

Further,from an operational perspective, MC Advisors’ investment professionals are currently working remotely. An extended periodof remote work arrangements could strain our business continuity plans, introduce operational risk, including but not limitedto cybersecurity risks, and impair our ability to manage our business. In addition, we are highly dependent on third party serviceproviders for certain communication and information systems. As a result, we rely upon the successful implementation and executionof the business continuity planning of such providers in the current environment. If one or more of these third parties to whomwe outsource certain critical business activities experience operational failures as a result of the impacts from the spread ofCOVID-19, or claim that they cannot perform due to a force majeure, it may have a material adverse effect on our business, financialcondition, results of operations, liquidity and cash flows.

Weare currently operating in a period of capital markets disruption and economic uncertainty.

TheU.S. capital markets have experienced extreme volatility and disruption following the spread of COVID-19 in the United Statesthat began in December 2019. The global impact of the outbreak is rapidly evolving, and many countries have reacted byinstituting quarantines, prohibitions on travel and the closure of offices, businesses, schools, retail stores and otherpublic venues. Businesses have also implemented similar precautionary measures. Such measures, as well as the generaluncertainty surrounding the dangers and impact of COVID-19, have created significant disruption in supply chains and economicactivity. The impact of the COVID-19 pandemic has led to significant volatility in the global public equity markets and it isuncertain how long this volatility will continue. As the COVID-19 pandemic continues, the potential impacts,including a global, regional or other economic recession, remain uncertain and difficult to assess. Some economistsand major investment banks have expressed concern that the continued spread of the virus globally could lead to a long-termworld-wide economic downturn.

Disruptionsin the capital markets have increased the spread between the yields realized on risk-free and higher risk securities, resultingin illiquidity in parts of the capital markets. These and future market disruptions and/or illiquidity would be expected to havean adverse effect on our business, financial condition, results of operations and cash flows. Unfavorable economic conditionsalso would be expected to increase our funding costs, limit our access to the capital markets or result in a decision by lendersnot to extend credit to us. These events have limited and could continue to limit our investment originations, limit our abilityto grow and have a material negative impact on our operating results and the fair values of our debt and equity investments.

Additionally,the disruption in economic activity caused by the COVID-19 pandemic has had, and may continue to have, a negative effecton the potential for liquidity events involving our investments. The illiquidity of our investments may make it difficult forus to sell such investments to access capital if required, and as a result, we could realize significantly less than the valueat which we have recorded our investments if we were required to sell them for liquidity purposes. An inability to raise or accesscapital, and any required sale of all or a portion of our investments as a result, could have a material adverse effect on ourbusiness, financial condition or results of operations.

Wedepend upon MC Advisors’ senior management for our success, and upon its access to the investment professionals of MonroeCapital and its affiliates.

Wedo not have any internal management capacity or employees. We depend on the investment expertise, skill and network of businesscontacts of the senior investment professionals of MC Advisors, who evaluate, negotiate, structure, execute, monitor and serviceour investments in accordance with the terms of the Investment Advisory and Management Agreement. Our success depends to a significantextent on the continued service and coordination of the senior investment professionals of MC Advisors, particularly Messrs. Koenig,Peck, Egan and VanDerMeid, who comprise the MC Advisors investment committee. These individuals may have other demands on theirtime now and in the future, and we cannot assure you that they will continue to be actively involved in our management. Each ofthese individuals is an employee of MC Management and is not subject to an employment contract. The departure of any of theseindividuals or competing demands on their time in the future could have a material adverse effect on our ability to achieve ourinvestment objective.

MCAdvisors evaluates, negotiates, structures, closes and monitors our investments in accordance with the terms of the InvestmentAdvisory and Management Agreement. We can offer no assurance, however, that MC Advisors’ senior investment professionalswill continue to provide investment advice to us. If these individuals do not maintain their existing relationships with MonroeCapital and its affiliates and do not develop new relationships with other sources of investment opportunities, we may not beable to grow our investment portfolio or achieve our investment objective. In addition, individuals with whom Monroe Capital’ssenior investment professionals have relationships are not obligated to provide us with investment opportunities. Therefore, wecan offer no assurance that such relationships will generate investment opportunities for us.

MCAdvisors, an affiliate of Monroe Capital, provides us with access to Monroe Capital’s investment professionals. MC Advisorsalso depends upon Monroe Capital to obtain access to deal flow generated by the investment professionals of Monroe Capital andits affiliates. The Staffing Agreement provides that MC Management will make available to MC Advisors experienced investment professionalsand access to the senior investment personnel of Monroe Capital for purposes of evaluating, negotiating, structuring, closingand monitoring our investments. We are not a party to this Staffing Agreement and cannot assure you that MC Management will continueto fulfill its obligations under the agreement. Furthermore, the Staffing Agreement may be terminated by either party withoutpenalty upon 60 days’ written notice to the other party. If MC Management fails to perform or terminates the agreement,we cannot assure you that MC Advisors will enforce the Staffing Agreement or that such agreement will not be terminated by eitherparty or that we will continue to have access to the investment professionals of Monroe Capital and its affiliates or their informationand deal flow.

Theinvestment committee that oversees our investment activities is provided by MC Advisors under the Investment Advisory and ManagementAgreement. The loss of any member of MC Advisors’ investment committee or of other Monroe Capital senior investment professionalswould limit our ability to achieve our investment objective and operate as we anticipate. This could have a material adverse effecton our financial condition and results of operations.

Ourbusiness model depends to a significant extent upon strong referral relationships with financial institutions, sponsors and investmentprofessionals. Any inability of MC Advisors to maintain or develop these relationships, or the failure of these relationshipsto generate investment opportunities, could adversely affect our business.

Wedepend upon the senior investment professionals of MC Advisors to maintain their relationships with financial institutions, sponsorsand investment professionals, and we rely to a significant extent upon these relationships to provide us with potential investmentopportunities. If the senior investment professionals of MC Advisors fail to maintain such relationships, or to develop new relationshipswith other sources of investment opportunities, we will not be able to grow our investment portfolio. In addition, individualswith whom the senior investment professionals of MC Advisors have relationships are not obligated to provide us with investmentopportunities, and, therefore, we can offer no assurance that these relationships will generate investment opportunities for usin the future.

Ourfinancial condition and results of operations depend on our ability to manage our business effectively.

Ourability to achieve our investment objective and grow depends on our ability to manage our business. This depends, in turn, onMC Advisors’ ability to identify, invest in and monitor companies that meet our investment criteria. The achievement ofour investment objectives depends upon MC Advisors’ execution of our investment process, its ability to provide competent,attentive and efficient services to us and, to a lesser extent, our access to financing on acceptable terms. MC Advisors has substantialresponsibilities under the Investment Advisory and Management Agreement. The senior origination professionals and other personnelof MC Advisors and its affiliates may be called upon to provide managerial assistance to our portfolio companies. These activitiesmay distract them or slow our rate of investment. Any failure to manage our business and our future growth effectively could havea material adverse effect on our business, financial condition, results of operations and prospects. Our results of operationsdepend on many factors, including the availability of opportunities for investment, readily accessible short and long-term fundingalternatives in the financial markets and economic conditions. Furthermore, if we cannot successfully operate our business orimplement our investment policies and strategies, it could negatively impact our ability to pay dividends or other distributionsand you may lose all or part of your investment.

Theremay be conflicts related to obligations that MC Advisors’ senior investment professionals and members of its investmentcommittee have to other clients.

Thesenior investment professionals and members of the investment committee of MC Advisors serve or may serve as officers, directorsor principals of entities that operate in the same or a related line of business as we do, or of investment funds, accounts orother investment vehicles sponsored or managed by MC Advisors or its affiliates. In serving in these multiple capacities, theymay have obligations to other clients or investors in those entities, the fulfillment of which may not be in our best interestsor in the best interest of our stockholders. For example, Messrs. Koenig, Peck, Egan and VanDerMeid have and will continue tohave management responsibilities for other investment funds, accounts or other investment vehicles sponsored or managed by affiliatesof MC Advisors. In serving in these multiple capacities, they may have obligations to other clients or investors in those entities,the fulfillment of which may not be in the best interests of us or our stockholders. MC Advisors seeks to allocate investmentopportunities among eligible accounts in a manner that is fair and equitable over time and consistent with its allocation policy.

MCAdvisors manages other assets in a private BDC, and affiliates of MC Advisors manage other assets in nine closed-end funds, twosmall business investment companies and 20 private funds that also have an investment strategy focused primarily on senior, unitrancheand junior secured debt and, to a lesser extent, unsecured subordinated debt to lower middle-market companies. Except for theprivate BDC, none of these funds are registered with the SEC. In addition, MC Advisors and/or its affiliates may manage otherentities in the future with an investment strategy that has the same or similar focus as ours.

MonroeCapital and its affiliates seek to allocate investment opportunities among the participating funds, including us, in proportionto the relative amounts of capital available for new investments, taking into account such factors as Monroe Capital may determineappropriate, including investment objectives, legal or regulatory restrictions, current holdings, availability of capital forinvestment, immediately available cash, the size of investments generally, risk-return considerations, relative exposure to markettrends, maintenance of targeted leverage level, targeted asset mix, target investment return, diversification requirements, strategicobjectives, specific liquidity requirements, tax consequences, limitations and restrictions on a fund’s portfolio that areimposed by such fund’s governing board or documents, and other considerations or factors that Monroe Capital deems necessaryor appropriate in light of the circumstances at such time (collectively, the “Allocation Criteria”). We expect thatMonroe Capital will follow the Allocation Criteria with respect to all of its funds under management, including us.

Insituations where co-investment with other entities sponsored or managed by MC Advisors or its affiliates is not permitted or appropriate,such as when there is an opportunity to invest in securities of the same issuer that have different priorities or liens, MC Advisorswill need to decide whether we or such other entity or entities will proceed with the investment. MC Advisors will make thesedeterminations based on its policies and procedures which require that such opportunities be offered to eligible accounts on abasis that is fair and equitable over time. However, there can be no assurance that we will be able to participate in all investmentopportunities that are suitable to us.

MCAdvisors or its investment committee may, from time to time, possess material nonpublic information, limiting our investment discretion.

Themanaging members and the senior origination professionals of MC Advisors and the senior professionals and members of MC Advisors’investment committee may serve as directors of, or in a similar capacity with, companies in which we invest, the securities ofwhich are purchased or sold on our behalf. In the event that material nonpublic information is obtained with respect to such companies,or we become subject to trading restrictions under the internal trading policies of those companies or as a result of applicablelaw or regulations, we could be prohibited for a period of time from purchasing or selling the securities of such companies, andthis prohibition may have a material adverse effect on us.

Ourmanagement and incentive fee structure may create incentives for MC Advisors that are not fully aligned with the interests ofour stockholders.

Inthe course of our investing activities, we pay management and incentive fees to MC Advisors. Management fees are based on ourtotal assets (which include assets purchased with borrowed amounts but exclude cash and cash equivalents). As a result, investorsin our common stock invest on a “gross” basis and receive distributions on a “net” basis after expenses,resulting in a lower rate of return than one might achieve through direct investments. Because these fees are based on our totalassets, including assets purchased with borrowed amounts but excluding cash and cash equivalents, MC Advisors benefits when weincur debt or otherwise use leverage. This fee structure may encourage MC Advisors to cause us to borrow money to finance additionalinvestments or to maintain leverage when it would otherwise be appropriate to pay off our indebtedness. Under certain circumstances,the use of borrowed money may increase the likelihood of default, which would disfavor our stockholders. Our Board is chargedwith protecting our interests by monitoring how MC Advisors addresses these and other conflicts of interest associated with itsmanagement services and compensation. While our Board is not expected to review or approve each investment, our independent directorsperiodically review MC Advisors’ services and fees as well as its portfolio management decisions and portfolio performance.In connection with these reviews, our independent directors consider whether our fees and expenses (including those related toleverage) remain appropriate. As a result of this arrangement, MC Advisors or its affiliates may from time to time have intereststhat differ from those of our stockholders, giving rise to a conflict.

Thepart of the incentive fee payable to MC Advisors that relates to our net investment income is computed and paid on income thatmay include interest income that has been accrued but not yet received in cash. This fee structure may be considered to involvea conflict of interest for MC Advisors to the extent that it may encourage MC Advisors to favor debt financings that provide fordeferred interest, rather than current cash payments of interest. MC Advisors may have an incentive to invest in PIK interestsecurities in circumstances where it would not have done so but for the opportunity to continue to earn the incentive fee evenwhen the issuers of the deferred interest securities would not be able to make actual cash payments to us on such securities.This risk could be increased because MC Advisors is not obligated to reimburse us for any incentive fees received even if we subsequentlyincur losses or never receive in cash the deferred income that was previously accrued. In addition, the part of the incentivefee payable to MC Advisors that relates to our net investment income generally does not include any realized capital gains orlosses or unrealized capital gains or losses. However, part one incentive fees are subject to Incentive Fee Limitation as describedin Note 6 to the accompanying consolidated financial statements. Any net investment income incentive fee would not be subjectto repayment.

Ourincentive fee may induce MC Advisors to make certain investments, including speculative investments.

MCAdvisors receives an incentive fee based, in part, upon net capital gains realized on our investments. Unlike that portion ofthe incentive fee based on income, there is no hurdle rate applicable to the portion of the incentive fee based on net capitalgains. As a result, MC Advisors may have a tendency to invest more capital in investments that are likely to result in capitalgains as compared to income producing securities. Such a practice could result in our investing in more speculative securitiesthan would otherwise be the case, which could result in higher investment losses, particularly during economic downturns.

TheInvestment Advisory and Management Agreement with MC Advisors and the Administration Agreement with MC Management were not negotiatedon an arm’s length basis and may not be as favorable to us as if they had been negotiated with an unaffiliated third-party.

Wenegotiated the Investment Advisory and Management Agreement and the Administration Agreement with related parties. Consequently,their terms, including fees payable to MC Advisors, may not be as favorable to us as if they had been negotiated with an unaffiliatedthird-party. In addition, we may choose not to enforce, or to enforce less vigorously, our rights and remedies under these agreementsbecause of our desire to maintain our ongoing relationship with MC Advisors and MC Management. Any such decision, however, wouldbreach our fiduciary obligations to our stockholders.

Ourability to enter into transactions with our affiliates is restricted, which may limit the scope of investments available to us.

Weare prohibited under the 1940 Act from participating in certain transactions with our affiliates without the prior approval ofour independent directors and, in some cases, of the SEC. Any person that owns, directly or indirectly, five percent or more ofour outstanding voting securities is our affiliate for purposes of the 1940 Act, and we are generally prohibited from buying orselling any security from or to such affiliate, absent the prior approval of our independent directors. The 1940 Act also prohibitscertain “joint” transactions with certain of our affiliates, which could include investments in the same portfoliocompany, without prior approval of our independent directors and, in some cases, of the SEC. We are prohibited from buying orselling any security from or to any person who owns more than 25% of our voting securities or certain of that person’s affiliates,or entering into prohibited joint transactions with such persons, absent the prior approval of the SEC. As a result of these restrictions,we may be prohibited from buying or selling any security (other than any security of which we are the issuer) from or to any portfoliocompany of a private equity fund managed by MC Advisors or its affiliates without the prior approval of the SEC, which may limitthe scope of investment opportunities that would otherwise be available to us.

Wemay, however, co-invest with MC Advisors and its affiliates’ other clients in certain circumstances where doing so is consistentwith applicable law and SEC staff interpretations. For example, we may co-invest with such accounts consistent with guidance promulgatedby the SEC staff permitting us and such other accounts to purchase interests in a single class of privately placed securitiesso long as certain conditions are met, including that MC Advisors, acting on our behalf and on behalf of other clients, negotiatesno term other than price. We may also co-invest with MC Advisors’ affiliates’ other clients as otherwise permissibleunder regulatory guidance, applicable regulations, exemptive relief granted to us by the SEC on October 15, 2014 and MC Advisors’allocation policy, which the investment committee of MC Advisors maintains in writing. The allocation policy further providesthat allocations among us and these other funds are generally made in proportion to the relative amounts of capital availablefor new investments taking into account the Allocation Criteria. We expect that Monroe Capital will follow the Allocation Criteriawith respect to all of its funds under management, including us. However, we can offer no assurance that investment opportunitieswill be allocated to us fairly or equitably in the short-term or over time.

Insituations where co-investment with other entities sponsored or managed by MC Advisors or its affiliates is not permitted or appropriate,such as when there is an opportunity to invest in securities of the same issuer that have different priorities or liens, MC Advisorswill need to decide whether we or such other entity or entities will proceed with the investment. MC Advisors will make thesedeterminations based on its policies and procedures which require that such opportunities be offered to eligible accounts on abasis that is fair and equitable over time. Moreover, except in certain circumstances, we are unable to invest in any issuer inwhich a fund managed by MC Advisors or its affiliates has previously invested. Similar restrictions limit our ability to transactbusiness with our officers or directors or their affiliates.

Wemay also be prohibited under the 1940 Act from knowingly participating in certain transactions with our affiliates without theprior approval of the majority of the members of our Board who are not interested persons and, in some cases, prior approval bythe SEC. The SEC has interpreted the BDC regulations governing transactions with affiliates to prohibit certain “joint transactions”between entities that share a common investment adviser.

Weoperate in a highly competitive market for investment opportunities, which could reduce returns and result in losses.

Wecompete with a number of specialty and commercial finance companies to make the types of investments that we make in middle-marketcompanies, including BDCs, traditional commercial banks, private investment funds, regional banking institutions, small businessinvestment companies, investment banks and insurance companies. Additionally, with increased competition for investment opportunities,alternative investment vehicles such as hedge funds may seek to invest in areas they have not traditionally invested in or fromwhich they had withdrawn during the economic downturn, including investing in middle-market companies. As a result, competitionfor investments in lower middle-market companies has intensified, and we expect that trend to continue. Many of our existing andpotential competitors are substantially larger and have considerably greater financial, technical and marketing resources thanwe do. For example, some competitors may have a lower cost of funds and access to funding sources that are not available to us.In addition, some of our competitors may have higher risk tolerances or different risk assessments, which could allow them toconsider a wider variety of investments and establish more relationships than us. These characteristics could allow our competitorsto consider a wider variety of investments, establish more relationships and offer better pricing and more flexible structuringthan we offer. We may lose investment opportunities if we do not match our competitors’ pricing, terms and structure. Ifwe are forced to match our competitors’ pricing, terms and structure, however, we may not be able to achieve acceptablereturns on our investments or may bear substantial risk of capital loss. A significant part of our competitive advantage stemsfrom the fact that the lower middle-market is underserved by traditional commercial and investment banks, and generally has lessaccess to capital. A significant increase in the number and/or the size of our competitors in this target market could force usto accept less attractive investment terms.

Furthermore,many of our competitors are not subject to the regulatory restrictions that the 1940 Act imposes on us as a BDC or the sourceof income, asset diversification and distribution requirements we must satisfy to maintain our RIC status. The competitive pressureswe face may have a material adverse effect on our business, financial condition and results of operations. As a result of thiscompetition, we may not be able to take advantage of attractive investment opportunities from time to time, and we may not beable to identify and make investments that are consistent with our investment objective.

Inaddition, one of the effects of the COVID-19 pandemic was a decrease in the number of new investment opportunities in U.S. middlemarket companies during 2020. While we have seen the volume of new investment opportunities increase in the second half of 2020,we can offer no assurance about when, or if, the number of U.S. middle market company investing opportunities will equal or exceedthose available prior to the COVID-19 pandemic. In the event these conditions continue for an extended amount of time, they couldhave a material adverse effect on our business, financial condition and results of operations.

Wewill be subject to corporate-level U.S. federal income tax if we are unable to qualify or maintain qualification as a RIC underSubchapter M of the Code.

Weelected to be treated as a RIC under Subchapter M of the Code commencing with our taxable year ended December 31, 2012, have qualifiedin each taxable year since, and intend to qualify annually hereafter; however, no assurance can be given that we will be ableto qualify for and maintain RIC status. To receive RIC tax treatment under the Code and to be relieved of federal taxes on incomeand gains distributed to our stockholders, we must meet certain requirements, including source-of-income, asset diversificationand distribution requirements. The annual distribution requirement applicable to RICs is satisfied if we distribute at least 90%of our net ordinary income and net short-term capital gains in excess of net long-term capital losses, if any, to our stockholderson an annual basis. In addition, we will be subject to a 4% nondeductible federal excise tax to the extent that we do not satisfycertain additional minimum distribution requirements on a calendar year basis. To the extent we use debt financing, we will besubject to certain asset coverage ratio requirements under the 1940 Act and may be subject to financial covenants under loan andcredit agreements, each of which could, under certain circumstances, restrict us from making annual distributions necessary toreceive RIC tax treatment. If we are unable to obtain cash from other sources, we may fail to be taxed as a RIC and, thus, maybe subject to corporate-level U.S. federal income tax on our entire taxable income without regard to any distributions made byus. In order to be taxed as a RIC, we must also meet certain asset diversification requirements at the end of each calendar quarter.Failure to meet these tests may result in our having to dispose of certain investments quickly in order to prevent the loss ofRIC status. Because most of our investments are in private or thinly traded public companies, any such dispositions could be madeat disadvantageous prices and may result in substantial losses. If we fail to be taxed as a RIC for any reason and become subjectto corporate U.S. federal income tax, the resulting corporate U.S. federal income taxes could substantially reduce our net assets,the amount of income available for distributions to stockholders and the amount of our distributions and the amount of funds availablefor new investments. Such a failure would have a material adverse effect on us and our stockholders.

Anextended disruption in the capital markets and the credit markets could negatively affect our business.

Asa BDC, it will be necessary for us to maintain our ability to raise additional capital for investment purposes. Without sufficientaccess to the capital markets or credit markets, we may be forced to curtail our business operations or we may not be able topursue new business opportunities. The capital markets and the credit markets have experienced periods of extreme volatility anddisruption and, accordingly, there has been and may in the future be uncertainty in the financial markets in general. Ongoingdisruptive conditions in the financial industry and the impact of new legislation in response to those conditions could restrictour business operations and could adversely impact our results of operations and financial condition.

Weaccess the capital markets periodically to issue debt or equity securities or borrow from financial institutions in order to obtainsuch additional capital. Unfavorable economic conditions could increase our funding costs, limit our access to the capital marketsor result in a decision by lenders not to extend credit to us. A reduction in the availability of new capital could limit ourability to pursue new business opportunities and grow our business. In addition, we are required to distribute at least 90% ofour net ordinary income and net short-term capital gains in excess of net long-term capital losses, if any, to our stockholdersto qualify for the tax benefits available to RICs. As a result, these earnings will not be available to fund new investments.An inability to access the capital markets successfully could limit our ability to grow our business and execute our businessstrategy fully and could decrease our earnings, if any, which may have an adverse effect on the value of our securities.

Wemay need to raise additional capital to grow because we must distribute most of our income.

Wemay need additional capital to fund new investments and grow our portfolio of investments. We intend to access the capital marketsperiodically to issue debt or equity securities or borrow from financial institutions in order to obtain such additional capital.Unfavorable economic conditions could increase our funding costs, limit our access to the capital markets or result in a decisionby lenders not to extend credit to us. A reduction in the availability of new capital could limit our ability to grow. In addition,in order to qualify as a RIC, we are required to distribute each taxable year an amount at least equal to 90% of our net ordinaryincome and net short-term capital gains in excess of net long-term capital losses, if any, to our stockholders. As a result, theseearnings are not available to fund new investments. An inability to access the capital markets successfully could limit our abilityto grow our business and execute our business strategy fully and could decrease our earnings, if any, which may have an adverseeffect on the value of our securities.

Wemay have difficulty paying our required distributions if we recognize income before, or without, receiving cash representing suchincome.

ForU.S. federal income tax purposes, we include in income certain amounts that we have not yet received in cash, such as originalissue discount, or through contracted PIK interest, which represents contractual interest added to the loan balance and due atthe end of the loan term. Original issue discount, which could be significant relative to our overall investment activities, orincreases in loan balances as a result of contracted PIK arrangements, are included in income before we receive the correspondingcash payments. We also may be required to include in income certain other amounts that we will not receive in cash.

Thatpart of the incentive fee payable by us that relates to our net investment income is computed and paid on income that may includeinterest that has been accrued but not yet received in cash, such as original issue discount and PIK interest. If we pay a netinvestment income incentive fee on interest that has been accrued, but not yet received in cash, it will increase the basis ofour investment in that loan, which will reduce the capital gain incentive fee that we would otherwise pay in the future. Nevertheless,if we pay a net investment income incentive fee on interest that has been accrued but not yet received, and if that portfoliocompany defaults on such a loan, it is possible that accrued interest previously included in the calculation of the incentivefee will become uncollectible.

Becausewe may recognize income before or without receiving cash representing such income, we may have difficulty meeting the requirementsapplicable to RICs. In such a case, we may have to sell some of our investments at times and/or at prices we would not consideradvantageous, raise additional debt or equity capital or reduce new investment originations and sourcings to meet these distributionrequirements. If we are not able to obtain such cash from other sources, we may fail to qualify for the tax benefits availableto RICs and thus be subject to corporate-level U.S. federal income tax.

The1940 Act allows us to incur additional leverage, which could increase the risk of investing in us.

The1940 Act generally prohibits us from incurring indebtedness unless immediately after such borrowing we have an asset coveragefor total borrowings of at least 200% (i.e., the amount of debt may not exceed 50% of the value of our total assets). However,on March 23, 2018, the Small Business Credit Availability Act (the “SBCAA”) was signed into law, which included variouschanges to regulations under the federal securities laws that impact BDCs. The SBCAA amended the 1940 Act to allow BDCs to decreasetheir asset coverage requirement from 200% to 150% (i.e. the amount of debt may not exceed 66.7% of the value of our total assets),if certain requirements are met. Under the SBCAA, BDCs are allowed to reduce their asset coverage requirement to 150%, and therebyincrease leverage capacity, if stockholders representing at least a majority of the votes cast, when quorum is met, approve aproposal to do so. If a BDC receives stockholder approval, it would be allowed to reduce its asset coverage requirement to 150%on the first day after such approval. Alternatively, the SBCAA allows the majority of a BDCs independent directors to approvethe reduction in its asset coverage requirement to 150%, and such approval would become effective after one year. In either case,a BDC would be required to make certain disclosures on its website and in SEC filings regarding, among other things, the receiptof approval to reduce its asset coverage requirement to 150%, its leverage capacity and usage, and risks related to leverage.

OnMarch 27, 2018, our board of directors unanimously approved the application of the modified asset coverage requirements set forthin Section 61(a)(2) of the 1940 Act, as amended by the SBCAA. On March 27, 2018, our board of directors also recommended the submissionof a proposal for stockholders to approve the application of the 150% minimum asset coverage requirements at our annual meetingof stockholders held on June 20, 2018. At the annual meeting, our stockholders approved this proposal, and we became subject tothe 150% minimum asset coverage ratio, effective June 21, 2018.

Leverageis generally considered a speculative investment technique and may increase the risk of investing in our securities. Leveragemagnifies the potential for loss on investments in our indebtedness and on invested equity capital. As we use leverage to partiallyfinance our investments, you will experience increased risks of investing in our securities. If the value of our assets increases,then leveraging would cause the net asset value attributable to our common stock to increase more sharply than it would have hadwe not leveraged. Conversely, if the value of our assets decreases, leveraging would cause net asset value to decline more sharplythan it otherwise would have had we not leveraged our business. Similarly, any increase in our income in excess of interest payableon the borrowed funds would cause our net investment income to increase more than it would without the leverage, while any decreasein our income would cause net investment income to decline more sharply than it would have had we not borrowed. Such a declinecould negatively affect our ability to pay distributions, scheduled debt payments or other payments related to our securities.The effects of leverage would cause any decrease in net asset value for any losses to be greater than any increase in net assetvalue for any corresponding gains. If we incur additional leverage, you will experience increased risks of investing in our commonstock.

Regulationsgoverning our operation as a BDC affect our ability to and the way in which we raise additional capital.

Wemay issue debt securities or preferred stock and/or borrow money from banks or other financial institutions, which we refer tocollectively as “senior securities,” up to the maximum amount permitted by the 1940 Act. Under the provisions of the1940 Act, we are permitted as a BDC to issue senior securities in amounts such that our asset coverage ratio, as defined in the1940 Act, equals at least 150% (as of June 21, 2018) of total assets less all liabilities and indebtedness not represented bysenior securities, immediately after each issuance of senior securities (other than the SBA debentures of an SBIC subsidiary,as permitted by exemptive relief we have been granted by the SEC). If the value of our assets declines, we may be unable to satisfythis test. If that happens, we may be required to sell a portion of our investments and, depending on the nature of our leverage,repay a portion of our indebtedness at a time when such sales may be disadvantageous. This could have a material adverse effecton our operations and we may not be able to make distributions in an amount sufficient to be subject to taxation as a RIC, orat all. In addition, issuance of securities could dilute the percentage ownership of our current stockholders in us.

Noperson or entity from which we borrow money will have a veto power or a vote in approving or changing any of our fundamental policies.If we issue preferred stock, the preferred stock would rank “senior” to common stock in our capital structure, preferredstockholders would have separate voting rights on certain matters and might have other rights, preferences or privileges morefavorable than those of our common stockholders, and the issuance of preferred stock could have the effect of delaying, deferringor preventing a transaction or a change of control that might involve a premium price for holders of our common stock or otherwisebe in your best interest. Holders of our common stock will directly or indirectly bear all of the costs associated with offeringand servicing any preferred stock that we issue. In addition, any interests of preferred stockholders may not necessarily alignwith the interests of holders of our common stock and the rights of holders of shares of preferred stock to receive dividendswould be senior to those of holders of shares of our common stock.

Asa BDC, we generally are not able to issue our common stock at a price below net asset value per share without first obtainingthe approval of our stockholders and our independent directors. If we raise additional funds by issuing more common stock or seniorsecurities convertible into, or exchangeable for, our common stock, then percentage ownership of our stockholders at that timewould decrease, and you might experience dilution. We have stockholder approval to sell our common stock below net asset valuethrough June 17, 2021. We may seek further stockholder approval to sell shares below net asset value in the future.

Wemaintain a revolving credit facility and use other borrowed funds to make investments or fund our business operations, which exposesus to risks typically associated with leverage and increases the risk of investing in us.

Wemaintain a revolving credit facility, have issued debt securities and may borrow money, including through the issuance of additionaldebt securities or preferred stock, to leverage our capital structure, which is generally considered a speculative investmenttechnique. As a result:

Thefollowing table illustrates the effect of leverage on returns from an investment in our common stock assuming various annual returns,net of expenses. The calculations in the table below are hypothetical and actual returns may be higher or lower than those appearingin the table below.

Themajority of our assets are subject to security interests under our revolving credit facility and if wedefault on our obligations under such facility, we may suffer adverse consequences, including foreclosure on ourassets.

Asof December 31, 2020, the majority of our assets (excluding, among other things, investments held in and by certain of oursubsidiaries) were pledged as collateral under our revolving credit facility. If we default on our obligations under this facility,the lenders may have the right to foreclose upon and sell, or otherwise transfer, the collateral subject to their security interestsor their superior claim. In such event, we may be forced to sell our investments to raise funds to repay our outstanding borrowingsin order to avoid foreclosure and these forced sales may be at times and at prices we would not consider advantageous. Moreover,such deleveraging of our company could significantly impair our ability to effectively operate our business in the manner in whichwe have historically operated. As a result, we could be forced to curtail or cease new investment activities and lower or eliminatethe distributions that we have historically paid to our stockholders.

Inaddition, if the lenders exercise their right to sell the assets pledged under our revolving credit facility, such sales may becompleted at distressed sale prices, thereby diminishing or potentially eliminating the amount of cash available to us after repaymentof the amounts outstanding under the credit facilities.

Weare subject to risks associated with our revolving credit facility and the terms of our revolving credit facility may contractuallylimit our ability to incur additional indebtedness.

Ourrevolving credit facility, as amended, imposes certain conditions that may limit the amount of our distributions to stockholders.Distributions payable in our common stock under our dividend reinvestment plan are not limited by the revolving credit facility.Distributions in cash or property other than our common stock are generally limited to 115% of the amount of distributions requiredto maintain our ability to be subject to taxation as a RIC. We are required under the revolving credit facility to maintain ourability to be subject to taxation as a RIC.

Therevolving credit facility requires us to comply with certain financial and operational covenants, including asset coverage ratiosand a minimum net worth. For example, the revolving credit facility requires that we maintain an asset coverage ratio of at least1.5 to 1 and a senior debt coverage ratio of at least 2 to 1 at all times. We may divert cash to pay the lenders in amounts sufficientto cause these tests to be satisfied. Our compliance with these covenants depends on many factors, some of which, such as marketconditions, are beyond our control.

Ourability to sell our investments is also limited under the revolving credit facility. Under the revolving credit facility, thesale of any portfolio investment may not cause our covered debt amount to exceed our borrowing base. As a result, there may betimes or circumstances during which we are unable to sell investments, pay distributions or take other actions that might be inour best interests.

Availabilityof borrowings under the revolving credit facility is linked to the valuation of the collateral pursuant to a borrowing base mechanism.As such, declines in the fair market value of our investments which are collateral to the revolving credit facility may reduceavailability under our revolving credit facility.

Tothe extent we use debt to finance our investments, changes in interest rates will affect our cost of capital and net investmentincome.

Tothe extent we borrow money to make investments, our net investment income depends, in part, upon the difference between the rateat which we borrow funds and the rate at which we invest those funds. As a result, we can offer no assurance that a significantchange in market interest rates will not have a material adverse effect on our net investment income in the event we use debtto finance our investments. In periods of rising interest rates, our cost of funds would increase, which could reduce our netinvestment income. We expect that our long-term fixed-rate investments will be financed primarily with issuances of equity andlong-term debt securities. We may use interest rate risk management techniques in an effort to limit our exposure to interestrate fluctuations. Such techniques may include various interest rate hedging activities to the extent permitted by the 1940 Act.

Youshould also be aware that a rise in the general level of interest rates typically leads to higher interest rates applicable toour debt investments. Accordingly, an increase in interest rates may result in an increase of the amount of incentive fees payableto MC Advisors.

Theinterest rates of our revolving credit facility and loans to our portfolio companies that extend beyond 2023 might be subjectto change based on recent regulatory changes.

LIBOR, the London Interbank Offered Rate,is the basic rate of interest used in lending transactions between banks on the London interbank market and has been widely usedas a reference for setting the interest rate on loans globally. We typically use LIBOR as a reference rate in term loans we extendto portfolio companies such that the interest due to us pursuant to a term loan extended to a portfolio company is calculated usingLIBOR. The terms of our debt investments generally include minimum interest rate floors which are calculated based on LIBOR. Amountsdrawn under our revolving credit facility also currently bear interest at LIBOR plus a margin.

On July 27, 2017, the United Kingdom’sFinancial Conduct Authority (“FCA”), which regulates LIBOR, announced that it intends to phase out LIBOR by the endof 2021. However, in November 2020, ICE Benchmark Administration Limited (“IBA”), the LIBOR administrator, announcedthat it will consult on its intention to cease the publication of all British pound, euro, Swiss franc and Japanese yen LIBOR settingsand on its intention to cease the publication of the one-week and two-month U.S. dollar (“USD”) LIBOR settings immediatelyfollowing the LIBOR publication on December 31, 2021 and the remaining USD LIBOR settings immediately following the LIBOR publicationon June 30, 2023. This announcement is viewed as an effective extension of the end of USD LIBOR. Concurrently with each IBA announcement,the FCA published statements in support of the IBA announcements, including IBA’s proposed extension of the publication ofmost USD LIBOR tenors, noting that the extension would provide time to address the legacy contracts that reference USD LIBOR.

The U.S. Federal Reserve, in conjunctionwith the Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions, is consideringreplacing U.S. dollar LIBOR with a new index calculated by short term repurchase agreements, backed by Treasury securities, calledthe Secured Overnight Financing Rate (“SOFR”). The Federal Reserve Bank of New York began publishing SOFR in April2018. Whether or not SOFR attains market traction as a LIBOR replacement remains a question, and the future of LIBOR at this timeis uncertain, including whether the COVID-19 pandemic will have further effect on LIBOR transition plans.

Theelimination of LIBOR or any other changes or reforms to the determination or supervision of LIBOR could have an adverse impacton the market for or value of any LIBOR-linked securities, loans, and other financial obligations or extensions of credit heldby or due to us or on our overall financial condition or results of operations. If LIBOR ceases to exist, we may need to renegotiateour revolving credit facility and the credit agreements extending beyond 2023 with our portfolio companies that utilize LIBORas a factor in determining the interest rate to replace LIBOR with the new standard that is established. In addition, the cessationof LIBOR could:

Weare exposed to risks associated with changes in interest rates.

Interestrate fluctuations may have a substantial negative impact on our investments, the value of our common stock and our rate of returnon invested capital. A reduction in the interest rates on new investments relative to interest rates on current investments couldhave an adverse impact on our net investment income while an increase in interest rates could decrease the value of any investmentswe hold which earn fixed interest rates and increase our interest expense, thereby decreasing our net income. An increase in interestrates available to investors could also make investment in our common stock less attractive unless we are able to increase ourdividend rate. In addition, a significant increase in market interest rates could also result in an increase in our non-performingassets and a decrease in the value of our portfolio because our floating-rate loan portfolio companies may be unable to meet higherpayment obligations.

MRCCSBIC is subject to SBA regulations.

Undercurrent SBA regulations, a licensed SBIC can invest in entities that have a tangible net worth not exceeding $19.5 million andan average annual net income after U.S. federal income taxes (excluding any carryover losses) not exceeding $6.5 million for thetwo most recent fiscal years. In addition, a licensed SBIC must invest 25.0% of its capital in those entities that have a tangiblenet worth not exceeding $6.0 million and an average annual net income after U.S. federal income taxes (excluding any carryoverlosses) not exceeding $2.0 million for the two most recent fiscal years. The SBA regulations also provide alternative size standardcriteria to determine eligibility, which depend on the industry in which the business is engaged and are based on either the numberof employees or the gross sales. The SBA regulations permit licensed SBICs to make long term loans to small businesses, investin the equity securities of such businesses and provide them with consulting and advisory services. The SBA also places certainlimitations on the financing terms of investments by SBICs in portfolio companies and prohibits SBICs from providing funds forcertain purposes or to businesses in certain prohibited industries. Further, the SBA regulations require that a licensed SBICbe periodically examined and audited by the SBA staff to determine its compliance with the relevant SBA regulations. Compliancewith these SBA requirements may cause MRCC SBIC to forego attractive investment opportunities that are not permitted under theSBA regulations, and may cause MRCC SBIC to make investments it otherwise would not make in order to remain in compliance withthese regulations.

Failureto comply with the SBA regulations could result in the loss of the SBIC license and the resulting inability to participate inthe SBA debenture program. The SBA prohibits, without prior SBA approval, a “change of control” of an SBIC or transfersthat would result in any person (or a group of persons acting in concert) owning 10.0% or more of a class of capital stock ofa licensed SBIC. Current SBA regulations provide the SBA with certain rights and remedies if an SBIC violates their terms. Remediesfor regulatory violations are graduated in severity depending on the seriousness of capital impairment or other regulatory violations.For minor regulatory infractions, the SBA issues a warning. For more serious infractions, the use of SBA debentures may be limitedor prohibited, outstanding debentures can be declared to be immediately due and payable, restrictions on distributions and makingnew investments may be imposed and management fees may be required to be reduced. In severe cases, the SBA may require the removalof a general partner of an SBIC or its officers, directors, managers or partners, or the SBA may obtain appointment of a receiverfor the SBIC.

SBAregulations limit the amount that may be borrowed from the SBA by an SBIC.

TheSBA regulations currently limit the amount that is available to be borrowed by any SBIC and guaranteed by the SBA to 300.0% ofan SBIC’s regulatory capital or $175.0 million (as amended June 21, 2018), whichever is less. For two or more SBICs undercommon control (commonly referred to as a “family of funds”), the maximum amount of outstanding SBA debentures cannotexceed $350.0 million. If MRCC SBIC borrows the maximum amount from the SBA and thereafter requires additional capital, our costof capital may increase, and there is no assurance that we will be able to obtain additional financing on acceptable terms.

Moreover,there can be no assurance that MRCC SBIC will continue to receive SBA debenture funding. Receipt of SBA debenture funding dependsupon an SBIC’s continued compliance with SBA regulations and policies and the availability of funding. The amount of SBAdebenture funding available to SBICs depends upon annual Congressional authorizations and in the future may be subject to annualCongressional appropriations. There can be no assurance that there will be sufficient SBA debenture funding available at the timesdesired by MRCC SBIC.

Thedebentures issued by the SBA to MRCC SBIC have a maturity of ten years and bear interest semi-annually at fixed rates. MRCC SBICwill need to generate sufficient cash flow to make required debt payments to the SBA. If MRCC SBIC is unable to generate suchcash flow, the SBA, as a debt holder, will have a superior claim to our assets over our stockholders in the event MRCC SBIC liquidatesor the SBA exercises its remedies under such debentures as the result of a default by MRCC SBIC.

MRCCSBIC, as an SBIC, is limited in its ability to make distributions to us, which could result in us being unable to meet the minimumdistribution requirements to maintain our ability to be subject to taxation as a RIC.

Inorder to maintain our ability to be subject to taxation as a RIC, we are required to distribute to our stockholders on an annualbasis 90.0% of our net ordinary income and net short-term capital gains in excess of net long-term capital losses. For this purpose,our taxable income includes the income of MRCC SBIC (and any other entities that are disregarded as separate from us for U.S.federal income tax purposes). MRCC SBIC’s ability to make distributions to us may be limited by the Small Business InvestmentAct of 1958, as amended, and the regulations promulgated thereunder. As a result, in order to maintain our ability to be subjectto taxation as a RIC, we may be required to make distributions attributable to MRCC SBIC’s income without receiving anycorresponding cash distributions from it with respect to such income. We can make no assurances that MRCC SBIC will be able tomake, or not be limited in making, distributions to us. If we are unable to satisfy the annual distribution requirements, we mayfail to maintain our ability to be subject to taxation as a RIC, which would result in the imposition of corporate-level U.S.federal income tax on our entire taxable income without regard to any distributions made by us.

Ifwe do not invest a sufficient portion of our assets in qualifying assets, we could fail to qualify as a BDC, which would havea material adverse effect on our business, financial condition and results of operations.

Asa BDC, we may not acquire any assets other than “qualifying assets” unless, at the time of and after giving effectto such acquisition, at least 70% of our total assets are qualifying assets, as defined in section 55(a) of the 1940 Act. See “Business — Qualifying Assets.” We believe that most of the investments that we may acquire in thefuture will constitute qualifying assets. However, we may be precluded from investing in what we believe are attractive investmentsif such investments are not qualifying assets for purposes of the 1940 Act. If we do not invest a sufficient portion of our assetsin qualifying assets, we could violate the 1940 Act provisions applicable to BDCs. As a result of such violation, specific rulesunder the 1940 Act could prevent us, for example, from making follow-on investments in existing portfolio companies which couldresult in the dilution of our position or could require us to dispose of investments at inappropriate times in order to come intocompliance with the 1940 Act. If we need to dispose of investments quickly, it could be difficult to dispose of such investmentson favorable terms. We may not be able to find a buyer for such investments and, even if we do find a buyer, we may have to sellthe investments at a substantial loss. Any such outcomes would have a material adverse effect on our business, financial condition,results of operations, and cash flows.

Manyof our portfolio investments are recorded at fair value as determined in good faith by our Board and, as a result, there may beuncertainty as to the value of our portfolio investments.

Underthe 1940 Act, we are required to carry our portfolio investments at market value, or if there is no readily available market value,at fair value as determined by our Board. Many of our portfolio investments may take the form of securities that are not publiclytraded. The fair value of securities and other investments that are not publicly traded may not be readily determinable, and wevalue these securities at fair value as determined in good faith by our Board, including to reflect significant events affectingthe value of our securities. As part of the valuation process, we may take into account the following types of factors, if relevant,in determining the fair value of our investments:

Weexpect that most of our investments (other than cash and cash equivalents) will be classified as Level 3 in the fair value hierarchyand require disclosures about the level of disaggregation along with the inputs and valuation techniques we use to measure fairvalue. This means that our portfolio valuations are based on unobservable inputs and our own assumptions about how market participantswould price the asset or liability in question. Inputs into the determination of fair value of our portfolio investments requiresignificant management judgment or estimation. Even if observable market data is available, such information may be the resultof consensus pricing information or broker quotes, which include a disclaimer that the broker would not be held to such a pricein an actual transaction. The non-binding nature of consensus pricing and/or quotes accompanied by disclaimers materially reducesthe reliability of such information. We employ the services of one or more independent service providers to conduct fair valueappraisals of material investments for which market quotations are not readily available. These fair value appraisals for materialinvestments are received at least once every calendar year for each portfolio company investment, but are generally received quarterly. Thetypes of factors that our Board may take into account in determining the fair value of our investments generally include, as appropriate,comparison to publicly traded securities including such factors as yield, maturity and measures of credit quality, the enterprisevalue of a portfolio company, the nature and realizable value of any collateral, the portfolio company’s ability to makepayments and its earnings and discounted cash flow, the markets in which the portfolio company does business and other relevantfactors. Because such valuations, and particularly valuations of private securities and private companies, are inherently uncertain,may fluctuate over short periods of time and may be based on estimates, our determinations of fair value may differ materiallyfrom the values that would have been used if a ready market for these securities existed. Due to this uncertainty in the valueof our portfolio investments, a fair value determination may cause net asset value on a given date to materially understate oroverstate the value that we may ultimately realize upon one or more of our investments. As a result, investors purchasing sharesof our common stock based on an overstated net asset value would pay a higher price than the value of the investments might warrant.Conversely, investors selling shares during a period in which the net asset value understates the value of investments will receivea lower price for their shares than the value the investment portfolio might warrant.

Weadjust quarterly the valuation of our portfolio to reflect the determination of our Board of the fair value of each investmentin our portfolio. Any changes in fair value are recorded in our consolidated statements of operations as net change in unrealizedgain (loss).

Wemay experience fluctuations in our quarterly operating results.

Wecould experience fluctuations in our quarterly operating results due to a number of factors, including our ability or inabilityto make investments in companies that meet our investment criteria, the interest rate payable to us on the debt securities weacquire, the default rate on such securities, the level of our expenses, including the cost of our indebtedness, variations inand the timing of the recognition of realized and unrealized gains or losses, the degree to which we encounter competition inour markets and general economic conditions. As a result of these factors, results for any period should not be relied upon asbeing indicative of performance in future periods.

Changesin laws or regulations governing our operations may adversely affect our business or cause us to alter our business strategy.

Weand our portfolio companies are subject to regulation at the local, state and federal level. These laws and regulations, as wellas their interpretation, may change from time to time, including as the result of interpretive guidance or other directives fromthe U.S. President and others in the executive branch, and new laws, regulations and interpretations may also come into effect,including those governing the types of investments we or our portfolio companies are permitted to make, any of which could havea material adverse effect on our business, and political uncertainty could increase regulatory uncertainty in the near term. Theeffects of legislative and regulatory proposals directed at the financial services industry or affecting taxation, may negativelyimpact the operations, cash flows or financial condition of us or our portfolio companies, impose additional costs on us or ourportfolio companies, intensify the regulatory supervision of us or our portfolio companies or otherwise adversely affect our businessor the business of our portfolio companies. In addition, if we do not comply with applicable laws and regulations, we could loseany licenses that we then hold for the conduct of our business and may be subject to civil fines and criminal penalties.

Additionally,changes to the laws and regulations governing our operations, including those associated with RICs, may cause us to alter ourinvestment strategy in order to avail ourselves of new or different opportunities or result in the imposition of corporate-leveltaxes on us. Such changes could result in material differences to the strategies and plans set forth herein and may shift ourinvestment focus from the areas of expertise of MC Advisors to other types of investments in which MC Advisors may have littleor no expertise or experience. Any such changes, if they occur, could have a material adverse effect on our results of operationsand the value of your investment.

Overthe last several years, there also has been an increase in regulatory attention to the extension of credit outside of the traditionalbanking sector, raising the possibility that some portion of the non-bank financial sector will be subject to new regulation.While it cannot be known at this time whether any regulation will be implemented or what form it will take, increased regulationof non-bank credit extension could negatively impact our operations, cash flows or financial condition, impose additional costson us, intensify the regulatory supervision of us or otherwise adversely affect our business, financial condition and resultsof operations.

Thereis uncertainty surrounding potential legal, regulatory, tax and policy changes by new presidential administrations in the UnitedStates that may directly affect financial institutions and the global economy.

Thepresidential election occurred on November 3, 2020. Changes in federal policy, including tax policies, and at regulatory agenciesoccur over time through policy and personnel changes following elections, which lead to changes involving the level of oversightand focus on the financial services industry or the tax rates paid by corporate entities. The nature, timing and economic andpolitical effects of potential changes to the current legal and regulatory framework affecting financial institutions remain highlyuncertain pending the results of the presidential election. Uncertainty surrounding future changes may adversely affect our operatingenvironment and therefore our business, financial condition, results of operations and growth prospects.

OurBoard may change our investment objective, operating policies and strategies without prior notice or stockholder approval, theeffects of which may be adverse.

OurBoard has the authority, except as otherwise prohibited by the 1940 Act, to modify or waive certain of our operating policiesand strategies without prior notice and without stockholder approval. However, absent stockholder approval, we may not changethe nature of our business so as to cease to be, or withdraw our election as, a BDC. Under Maryland law, we also cannot be dissolvedwithout prior stockholder approval except by judicial action. We cannot predict the effect any changes to our current operatingpolicies and strategies would have on our business, operating results and the price value of our common stock. Nevertheless, anysuch changes could adversely affect our business and impair our ability to make distributions.

MCAdvisors can resign on 60 days’ notice, and we may not be able to find a suitable replacement within that time, resultingin a disruption in our operations that could adversely affect our financial condition, business and results of operations.

MCAdvisors has the right to resign under the Investment Advisory and Management Agreement without penalty at any time upon 60 days’written notice to us, whether we have found a replacement or not. If MC Advisors resigns, we may not be able to find a new investmentadvisor or hire internal management with similar expertise and ability to provide the same or equivalent services on acceptableterms within 60 days, or at all. If we are unable to do so quickly, our operations are likely to experience a disruption, ourfinancial condition, business and results of operations as well as our ability to pay distributions are likely to be adverselyaffected and the market price of our securities may decline. In addition, the coordination of our internal management and investmentactivities is likely to suffer if we are unable to identify and reach an agreement with a single institution or group of executiveshaving the expertise possessed by MC Advisors and its affiliates. Even if we were able to retain comparable management, whetherinternal or external, the integration of such management and their lack of familiarity with our investment objective may resultin additional costs and time delays that may adversely affect our financial condition, business and results of operations.

MCManagement can resign on 60 days’ notice from its role as our administrator under the Administration Agreement, and we maynot be able to find a suitable replacement within that time, resulting in a disruption in our operations that could adverselyaffect our financial condition, business and results of operations.

MCManagement has the right to resign under the Administration Agreement without penalty upon 60 days’ written notice to us,whether we have found a replacement or not. If MC Management resigns, we may not be able to find a new administrator or hire internalmanagement with similar expertise and ability to provide the same or equivalent services on acceptable terms, or at all. If weare unable to do so quickly, our operations are likely to experience a disruption, our financial condition, business and resultsof operations as well as our ability to pay distributions are likely to be adversely affected and the market price of our sharesmay decline. In addition, the coordination of our internal management and administrative activities is likely to suffer if weare unable to identify and reach an agreement with a service provider or individuals with the expertise possessed by MC Management.Even if we were able to retain a comparable service provider or individuals to perform such services, whether internal or external,their integration into our business and lack of familiarity with our investment objective may result in additional costs and timedelays that may adversely affect our financial condition, business and results of operations.

Effortsto comply with the Sarbanes-Oxley Act involve significant expenditures, and non-compliance with the Sarbanes-Oxley Act may adverselyaffect us and the market price of our securities.

Asa publicly traded company, we incur legal, accounting and other expenses, including costs associated with the periodic reportingrequirements applicable to a company whose securities are registered under the Exchange Act, as well as additional corporate governancerequirements, including requirements under the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, and other rules implementedby the SEC.

Weare subject to the Sarbanes-Oxley Act, and the related rules and regulations promulgated by the SEC. Under current SEC rules,our management is required to report on its internal controls over financial reporting pursuant to Section 404 of the Sarbanes-OxleyAct and rules and regulations of the SEC thereunder. We are required to review on an annual basis our internal controls over financialreporting, and on a quarterly and annual basis to evaluate and disclose changes in our internal controls over financial reporting.As a result, we expect to continue to incur associated expenses, which may negatively impact our financial performance and ourability to make distributions. This process also will result in a diversion of our management’s time and attention. We cannotbe certain as to the timing of completion of our evaluation, testing and remediation actions or the impact of the same on ouroperations and may not be able to ensure that the process is effective or that the internal controls are or will be effectivein a timely manner. There can be no assurance that our quarterly reviews and annual audits will not identify additional materialweaknesses. In the event that we are unable to maintain or achieve compliance with the Sarbanes-Oxley Act and related rules, ourvalue and results of operations may be adversely affected. As a result, we expect to incur significant associated expenses, whichmay negatively impact our financial performance and our ability to make distributions.

Wemay incur lender liability as a result of our lending activities.

Inrecent years, a number of judicial decisions have upheld the right of borrowers and others to sue lending institutions on thebasis of various evolving legal theories, collectively termed “lender liability.” Generally, lender liability is foundedon the premise that a lender has either violated a duty, whether implied or contractual, of good faith and fair dealing owed tothe borrower or has assumed a degree of control over the borrower resulting in the creation of a fiduciary duty owed to the borroweror its other creditors or stockholders. We may be subject to allegations of lender liability, which could be time-consuming andexpensive to defend and result in significant liability.

Wemay incur liability as a result of providing managerial assistance to our portfolio companies.

Inthe course of providing significant managerial assistance to certain portfolio companies, certain of our management and directorsmay serve as directors on the boards of such companies. To the extent that litigation arises out of investments in these companies,our management and directors may be named as defendants in such litigation, which could result in an expenditure of our funds,through our indemnification of such officers and directors, and the diversion of management time and resources.

MCAdvisors may not be able to achieve the same or similar returns as those achieved by our senior management and investment teamswhile they were employed at prior positions.

Thetrack record and achievements of the senior investment professionals of Monroe Capital are not necessarily indicative of futureresults that will be achieved by MC Advisors. As a result, MC Advisors may not be able to achieve the same or similar returnsas those achieved by the senior investment professionals of Monroe Capital.

RisksRelated to Our Investments

Eventsoutside of our control, including public health crises, could negatively affect our portfolio companies, our investment adviserand the results of our operations.

Periodsof market volatility could continue to occur in response to pandemics or other events outside of our control. We, MC Advisors,and the portfolio companies in which we invest in could be affected by force majeure events (i.e., events beyond the control ofthe party claiming that the event has occurred, such as acts of God, fire, flood, earthquakes, outbreaks of an infectious disease,pandemic or any other serious public health concern, war, terrorism, labor strikes, major plant breakdowns, pipeline or electricityline ruptures, failure of technology, defective design and construction, accidents, demographic changes, government macroeconomicpolicies, social instability, etc.). Some force majeure events could adversely affect the ability of a party (including us, MCAdvisors, a portfolio company or a counterparty to us, MC Advisors, or a portfolio company) to perform its obligations until itis able to remedy the force majeure event. In addition, force majeure events, such as the cessation of the operation of equipmentfor repair or upgrade, could similarly lead to the unavailability of essential equipment and technologies.

Theserisks could, among other effects, adversely impact the cash flows available from a portfolio company, cause personal injury orloss of life, including to a senior manager of MC Advisors or its affiliates, damage property, or instigate disruptions of service.In addition, the cost to a portfolio company or us of repairing or replacing damaged assets resulting from such force majeureevent could be considerable. It will not be possible to insure against all such events, and insurance proceeds received, if any,could be inadequate to completely or even partially cover any loss of revenues or investments, any increases in operating andmaintenance expenses, or any replacements or rehabilitation of property. Certain events causing catastrophic loss could be eitheruninsurable, or insurable at such high rates as to adversely impact us, MC Advisors, or portfolio companies, as applicable. Forcemajeure events that are incapable of or are too costly to cure could have permanent adverse effects. Certain force majeure events(such as war or an outbreak of an infectious disease) could have a broader negative impact on the world economy and internationalbusiness activity generally, or in any of the countries in which we invest or our portfolio companies operate specifically.

Suchforce majeure events could result in or coincide with: increased volatility in the global securities, derivatives and currencymarkets; a decrease in the reliability of market prices and difficulty in valuing assets; greater fluctuations in currency exchangerates; increased risk of default (by both government and private issuers); further social, economic, and political instability;nationalization of private enterprise; greater governmental involvement in the economy or in social factors that impact the economy;less governmental regulation and supervision of the securities markets and market participants and decreased monitoring of themarkets by governments or self-regulatory organizations and reduced enforcement of regulations; limited, or limitations on, theactivities of investors in such markets; controls or restrictions on foreign investment, capital controls and limitations on repatriationof invested capital; inability to purchase and sell investments or otherwise settle security or derivative transactions (i.e.,a market freeze); unavailability of currency hedging techniques; substantial, and in some periods extremely high, rates of inflation,which can last many years and have substantial negative effects on credit and securities markets as well as the economy as a whole;recessions; and difficulties in obtaining and/or enforcing legal judgments.

Additionally,a major governmental intervention into industry, including the nationalization of an industry or the assertion of control overone or more portfolio companies or its assets, could result in a loss to us, including if the investment in such portfolio companiesis canceled, unwound or acquired (which could result in inadequate compensation). Any of the foregoing could therefore adverselyaffect the performance of us and our investments.

Economicrecessions or downturns could impair our portfolio companies and harm our operating results.

Manyof our portfolio companies are susceptible to economic slowdowns or recessions and may be unable to repay our loans during theseperiods. These portfolio companies may face intense competition, including competition from companies with greater financial resources,more extensive research and development, manufacturing, marketing and service capabilities and greater number of qualified andexperienced managerial and technical personnel. They may need additional financing that they are unable to secure and that weare unable or unwilling to provide, or they may be subject to adverse developments unrelated to the technologies they acquire.

Therefore,our non-performing assets are likely to increase, and the value of our portfolio is likely to decrease during these periods. Adverseeconomic conditions may decrease the value of collateral securing some of our loans and the value of our equity investments andcould lead to financial losses in our portfolio and a corresponding decrease in revenues, net income and assets.

Unfavorableeconomic conditions also could increase our funding costs, limit our access to the capital markets or result in a decision bylenders not to extend credit to us. These events could prevent us from increasing our investments and harm our operating results.

Aportfolio company’s failure to satisfy financial or operating covenants imposed by us or other lenders could lead to defaultsand, potentially, acceleration of its loans and foreclosure on its assets, which could trigger cross-defaults under other agreementsand jeopardize our portfolio company’s ability to meet its obligations under the debt securities that we hold. We may incurexpenses to the extent necessary to seek recovery upon default or to negotiate new terms with a defaulting portfolio company.It is possible that we could become subject to a lender liability claim, including as a result of actions taken if we or MC Advisorsrender significant managerial assistance to the borrower. Furthermore, if one of our portfolio companies were to file for bankruptcyprotection, even though we may have structured our investment as senior secured debt, depending on the facts and circumstances,including the extent to which we or MC Advisors provided managerial assistance to that portfolio company or otherwise exercisecontrol over it, a bankruptcy court might re-characterize our debt as a form of equity and subordinate all or a portion of ourclaim to claims of other creditors.

Marketconditions have materially and adversely affected debt and equity capital markets in the United States and around the world.

Inthe past, the global capital markets experienced periods of disruption resulting in increasing spreads between the yields realizedon riskier debt securities and those realized on securities perceived as being risk-free and a lack of liquidity in parts of thedebt capital markets, significant write-offs in the financial services sector relating to subprime mortgages and the re-pricingof credit risk in the broadly syndicated market. These events, along with the deterioration of the housing market, illiquid marketconditions, declining business and consumer confidence and the failure of major financial institutions in the United States, ledto a general decline in economic conditions. This economic decline materially and adversely affected the broader financial andcredit markets and reduced the availability of debt and equity capital for the market as a whole and to financial firms in particular.If such a period of disruption were to occur in the future, to the extent that we wish to use debt to fund our investments, thedebt capital that will be available to us, if at all, may be at a higher cost, and on terms and conditions that may be less favorable,than what we expect, which could negatively affect our financial performance and results. A prolonged period of market illiquiditymay cause us to reduce the volume of loans we originate and/or fund below historical levels and adversely affect the value ofour portfolio investments, which could have a material and adverse effect on our business, financial condition, and results ofoperations. The spread between the yields realized on riskier debt securities and those realized on securities perceived as beingrisk-free has remained narrow on a relative basis recently. If these spreads were to widen or if there were deterioration of marketconditions, these events could materially and adversely affect our business.

Ourinvestments in leveraged portfolio companies may be risky, and we could lose all or part of our investment.

Investmentin leveraged companies involves a number of significant risks. Leveraged companies, including lower middle-market companies, inwhich we invest may have limited financial resources and may be unable to meet their obligations under their debt securities thatwe hold. Such developments may be accompanied by a deterioration in the value of any collateral and a reduction in the likelihoodof our realizing any guarantees that we may have obtained in connection with our investment. In addition, our junior secured loansare generally subordinated to senior loans. As such, other creditors may rank senior to us in the event of an insolvency.

Ourportfolio companies will likely consist primarily of lower middle-market, privately owned companies, which may present a greaterrisk of loss than loans to larger companies.

Ourportfolio consists, and will most likely continue to consist, primarily of loans to lower middle-market, privately owned companies.Compared to larger, publicly traded firms, these companies generally have more limited access to capital and higher funding costs,may be in a weaker financial position and may need more capital to expand, compete and operate their business. In addition, manyof these companies may be unable to obtain financing from public capital markets or from traditional sources, such as commercialbanks. Accordingly, loans made to these types of borrowers may entail higher risks than loans made to companies that have largerbusinesses, greater financial resources or are otherwise able to access traditional credit sources on more attractive terms.

Investingin lower middle-market companies involves a number of significant risks, including that lower middle-market companies:

Anyof these factors or changes thereto could impair a portfolio company’s financial condition, results of operation, cash flowor result in other adverse events, such as bankruptcy, any of which could limit a portfolio company’s ability to make scheduledpayments on loans from us. This, in turn, may lead to their inability to make payments on outstanding borrowings, which couldresult in losses in our loan portfolio and a decrease in our net interest income and book value.

Wemay be subject to risks associated with our investments in senior loans.

Weinvest in senior secured loans. Senior secured loans are usually rated below investment grade or may also be unrated. As a result,the risks associated with senior secured loans may be considered by credit rating agencies to be similar to the risks of belowinvestment grade fixed income instruments, although senior secured loans are senior and secured in contrast to other below investmentgrade fixed income instruments, which are often subordinated or unsecured. Investment in senior secured loans rated below investmentgrade is considered speculative because of the credit risk of their issuers. Such companies are more likely than investment gradeissuers to default on their payments of interest and principal owed to us, and such defaults could have a material adverse effecton our performance. An economic downturn would generally lead to a higher non-payment rate, and a senior secured loan may losesignificant market value before a default occurs. Moreover, any specific collateral used to secure a senior secured loan may declinein value or become illiquid, which would adversely affect the senior secured loan’s value.

Theremay be less readily available and reliable information about most senior secured loans than is the case for many other types ofsecurities, including securities issued in transactions registered under the Securities Act or registered under the Exchange Act.As a result, MC Advisors will rely primarily on its own evaluation of a borrower’s credit quality rather than on any availableindependent sources. Therefore, we will be particularly dependent on the analytical abilities of MC Advisors.

Ingeneral, the secondary trading market for senior secured loans is not well developed. No active trading market may exist for certainsenior secured loans, which may make it difficult to value them. Illiquidity and adverse market conditions may mean that we maynot be able to sell senior secured loans quickly or at a fair price. To the extent that a secondary market does exist for certainsenior secured loans, the market for them may be subject to irregular trading activity, wide bid/ask spreads and extended tradesettlement periods.

Wemay be subject to risks associated with our investments in junior debt securities.

Weinvest in junior debt securities. Although certain junior debt securities are typically senior to common stock or other equitysecurities, the equity and debt securities in which we will invest may be subordinated to substantial amounts of senior debt,all or a significant portion of which may be secured. Such subordinated investments may be characterized by greater credit risksthan those associated with the senior obligations of the same issuer. These subordinated securities may not be protected by allof the financial covenants, such as limitations upon additional indebtedness, typically protecting such senior debt. Holders ofjunior debt generally are not entitled to receive full payments in bankruptcy or liquidation until senior creditors are paid infull. Holders of equity are not entitled to payments until all creditors are paid in full. In addition, the remedies availableto holders of junior debt are normally limited by restrictions benefiting senior creditors. In the event any portfolio companycannot generate adequate cash flow to meet senior debt service, we may suffer a partial or total loss of capital invested.

Wemay be subject to risks associated with our investments in unitranche secured loans and securities.

Weinvest in unitranche secured loans, which are a combination of senior secured and junior secured debt in the same facility inwhich we syndicate a “first out” portion of the loan to an investor and retain a “last out” portion ofthe loan. Unitranche secured loans provide all of the debt needed to finance a leveraged buyout or other corporate transaction,both senior and junior, but generally in a first lien position, while the borrower generally pays a blended, uniform interestrate rather than different rates for different tranches. Unitranche secured debt generally requires payments of both principaland interest throughout the life of the loan. Generally, we expect these securities to carry a blended yield that is between seniorsecured and junior debt interest rates. Unitranche secured loans provide a number of advantages for borrowers, including the following:simplified documentation, greater certainty of execution and reduced decision-making complexity throughout the life of the loan.In some cases, a portion of the total interest may accrue or be paid in kind. Because unitranche secured loans combine characteristicsof senior and junior financing, unitranche secured loans have risks similar to the risks associated with senior secured and secondlien loans and junior debt in varying degrees according to the combination of loan characteristics of the unitranche secured loan.

Loansmay become nonperforming for a variety of reasons.

Anonperforming loan may require substantial debt work-out negotiations or restructuring that may entail a substantial reductionin the interest rate and/or a substantial write-down of the principal of such loan. Because of the unique and customized natureof a loan agreement and the private syndication of a loan, certain loans may not be purchased or sold as easily as publicly tradedsecurities, and, historically, the trading volume in the loan market has been small relative to other markets. Loans may encountertrading delays due to their unique and customized nature, and transfers of interests in loans may require the consent of an agentor borrower.

Thelack of liquidity in our investments may adversely affect our business.

Allof our assets may be invested in illiquid securities, and a substantial portion of our investments in leveraged companies willbe subject to legal and other restrictions on resale or will otherwise be less liquid than more broadly traded public securities.The illiquidity of these investments may make it difficult for us to sell such investments when desired. In addition, if we arerequired to liquidate all or a portion of our portfolio quickly, we may realize significantly less than the value at which wehave previously recorded these investments. As a result, we do not expect to achieve liquidity in our investments in the near-term.However, to maintain the election to be regulated as a BDC and qualify as a RIC, we may have to dispose of investments if we donot satisfy one or more of the applicable criteria under the respective regulatory frameworks. We may also face other restrictionson our ability to liquidate an investment in a portfolio company to the extent that we or MC Advisors have material nonpublicinformation regarding such portfolio company.

Pricedeclines and illiquidity in the corporate debt markets may adversely affect the fair value of our portfolio investments, reducingour net asset value through increased net unrealized losses.

Asa BDC, we are required to carry our investments at market value or, if no market value is ascertainable, at fair value as determinedin good faith by our Board. When an external event such as a purchase transaction, public offering or subsequent equity sale occurs,we use the pricing indicated by the external event to corroborate our valuation. We record decreases in the market values or fairvalues of our investments as unrealized losses. Declines in prices and liquidity in the corporate debt markets may result in significantnet unrealized losses on our portfolio. The effect of all of these factors on our portfolio may reduce our net asset value byincreasing net unrealized losses on our portfolio. Depending on market conditions, we could incur substantial realized lossesand may suffer additional unrealized losses in future periods, which could have a material adverse effect on our business, financialcondition and results of operations.

Ourportfolio companies may prepay loans, which prepayment may reduce stated yields if capital returned cannot be invested in transactionswith equal or greater expected yields.

Theloans underlying our portfolio may be callable at any time, and many of them can be repaid with no premium to par. It is generallynot clear and highly unpredictable when or if any loan might be called. Whether a loan is called will depend both on the continuedpositive performance of the portfolio company and the existence of favorable financing market conditions that allow such companythe ability to replace existing financing with less expensive capital. As market conditions change frequently, it is unknown when,and if, this may be possible for each portfolio company. Risks associated with owning loans include the fact that prepaymentsmay occur at any time, sometimes without premium or penalty, and that the exercise of prepayment rights during periods of decliningspreads could cause us to reinvest prepayment proceeds in lower-yielding instruments. In the case of some of these loans, havingthe loan called early may reduce our achievable yield if the capital returned cannot be invested in transactions with equal orgreater expected yields.

Ourportfolio may be exposed in part to one or more specific industries, which may subject us to a risk of significant loss in a particularinvestment or investments if there is a downturn in that particular industry.

Ourportfolio may be exposed in part to one or more specific industries. A downturn in any particular industry in which we are investedcould significantly impact the aggregate returns we realize. If an industry in which we have significant investments suffers fromadverse business or economic conditions, including the effects of the COVID-19 pandemic, as these industries have to varying degrees,a material portion of our investment portfolio could be affected adversely, which, in turn, could adversely affect our financialposition and results of operations.

Asof December 31, 2020, our investments in the High Tech Industries; Services: Business; and Banking, Finance, Insurance &Real Estate industries represented approximately 14.9%, 14.4% and 13.3%, respectively, of the fair value of our portfolio andare subject to certain risks particular to these industries. The laws and rules governing the business of companies in theseindustries and interpretations of those laws and rules are subject to frequent change and broad latitude is given to theagencies administering those regulations. Existing or future laws and rules could force our portfolio companies operating inthese industries to change how they do business, restrict revenue, increase costs, change reserve levels and change businesspractices. Any of these factors could materially adversely affect the operations of a portfolio company in these industriesand, in turn, impair our ability to timely collect principal and interest payments owed to us.

Wemay be subject to risks associated with our investments in the technology industry.

Wemay invest portions of our portfolio in the technology industry. There are risks in investing in companies that target technology-relatedmarkets, including rapid and sometimes dramatic price erosion of products, the reliance on capital and debt markets to financelarge capital outlays, including fabrication facilities, the reliance on partners outside of the United States, particularly inAsia, and inherent cyclicality of the technology market in general. As a result of multiple factors, access to capital may bedifficult or impossible for companies in our portfolio that are pursuing these markets. The revenue, income (or losses) and valuationsof technology-related companies can and often do fluctuate suddenly and dramatically. In addition, because of rapid technologicalchange, the average selling prices of products and some services provided by technology-related sectors have historically decreasedover their productive lives. As a result, the average selling prices of products and services offered by our portfolio companiesthat operate in technology-related sectors may decrease over time, which could adversely affect their operating results and, correspondingly,the value of any securities that we may hold. This could, in turn, materially adversely affect our business, financial conditionand results of operations.

Wemay be subject to risks associated with our investments in the business services industry.

Portfoliocompanies in the business services sector are subject to many risks, including the negative impact of regulation, changing technology,a competitive marketplace and difficulty in obtaining financing. Portfolio companies in the business services industry must respondquickly to technological changes and understand the impact of these changes on customers’ preferences. Adverse economic,business, or regulatory developments affecting the business services sector could have a negative impact on the value of our investmentsin portfolio companies operating in this industry, and therefore could negatively impact our business and results of operations.

Wemay be subject to risks associated with our investments in the insurance industry.

Wemay invest portions of our portfolio in the insurance industry. The insurance business has historically been a cyclical industrycharacterized by periods of intense price competition due to excessive underwriting capacity, as well as periods when shortagesof capacity permitted an increase in pricing and, thus, more favorable underwriting profits. An increase in premium levels isoften offset over time by an increasing supply of insurance capacity in the form of capital provided by new entrants and existinginsurers, which may cause prices to decrease. Any of these factors could lead to a significant reduction in premium rates, lessfavorable policy terms and fewer opportunities for our portfolio companies to underwrite insurance risks. Any of these factorscould in turn, materially adversely affect our business, financial condition and results of operations.

Wemay be subject to risks associated with our investments in the finance industry.

Wemay invest portions of our portfolio in the finance industry. The regulatory environment in which the finance industry operatescould have a material adverse effect on business and operating results for our portfolio companies. Our portfolio companies aresubject to a wide variety of laws and regulations in the jurisdictions where they operate, including supervision and licensingby numerous governmental entities. These laws and regulations can create significant constraints on operations and result in significantcosts related to compliance. Failure to comply with these laws and regulations could impair the ability of a portfolio companyto continue operating and result in substantial civil and criminal penalties, monetary damages, attorneys’ fees and costs,possible revocation of licenses, and damage to reputation, brand and valued customer relationships. Any of these factors couldin turn, materially adversely affect our business, financial condition and results of operations.

Tothe extent original issue discount and payment-in-kind interest constitute a portion of our income, we will be exposed to typicalrisks associated with such income being required to be included in taxable and accounting income prior to receipt of cash representingsuch income.

Ourinvestments include original issue discount, or OID, components and may include PIK interest or PIK dividend components. For theyear ended December 31, 2020, PIK interest and PIK dividends comprised approximately 14.3% and 0.3% of our investment income,respectively. To the extent original issue discount constitutes a portion of our income, we are exposed to typical risks associatedwith such income being required to be included in taxable and accounting income prior to receipt of cash, including the following:

Weare a non-diversified investment company within the meaning of the 1940 Act, and therefore we are not limited by the 1940 Actwith respect to the proportion of our assets that may be invested in securities of a single issuer.

Weare classified as a non-diversified investment company within the meaning of the 1940 Act, which means that we are not limitedby the 1940 Act with respect to the proportion of our assets that we may invest in securities of a single issuer. Our portfoliois and may in the future be concentrated in a limited number of portfolio companies and industries. Beyond the asset diversificationrequirements associated with our qualification as a RIC under the Code, we do not have fixed guidelines for diversification. Althoughwe are classified as a non-diversified investment company within the meaning of the 1940 Act, we maintain the flexibility to operateas a diversified investment company and have done so for an extended period of time. To the extent that we operate as a non-diversifiedinvestment company in the future, we may be subject to greater risk. To the extent that we assume large positions in the securitiesof a small number of issuers, our net asset value may fluctuate to a greater extent than that of a diversified investment companyas a result of changes in the financial condition or the market’s assessment of the issuer. We may also be more susceptibleto any single economic or regulatory occurrence than a diversified investment company. As a result, the aggregate returns we realizemay be significantly adversely affected if a small number of investments perform poorly or if we need to write down the valueof any one investment. Additionally, while we are not targeting any specific industries, our investments may be concentrated inrelatively few industries. As a result, a downturn in any particular industry in which we are invested could also significantlyimpact the aggregate returns we realize.

Wemay hold the debt securities of leveraged companies that may, due to the significant volatility of such companies, enter intobankruptcy proceedings.

Leveragedcompanies may experience bankruptcy or similar financial distress, and the risk of these events has been significantly increasedby the COVID-19 pandemic. The bankruptcy process has a number of significant inherent risks. Many events in a bankruptcy proceedingare the product of contested matters and adversary proceedings and are beyond the control of the creditors. A bankruptcy filingby a portfolio company may adversely and permanently affect the portfolio company. If the proceeding is converted to a liquidation,the value of the issuer may not equal the liquidation value that was believed to exist at the time of the investment. A bankruptcyor other workout often raise conflicts of interest (including, for example, conflicts over proposed waivers and amendments todebt covenants), including between investors who hold different interests in the applicable company. The duration of a bankruptcyproceeding is also difficult to predict, and a creditor’s return on investment can be adversely affected by delays untilthe plan of reorganization or liquidation ultimately becomes effective. The administrative costs in connection with a bankruptcyproceeding are frequently high and would be paid out of the debtor’s estate prior to any return to creditors. Because thestandards for classification of claims under bankruptcy law are vague, our influence with respect to the class of securities orother obligations we own may be lost by increases in the number and amount of claims in the same class or by different classificationand treatment. In the early stages of the bankruptcy process, it is often difficult to estimate the extent of, or even to identify,any contingent claims that might be made. In addition, certain claims that have priority by law (for example, claims for taxes)may be substantial.

Ourfailure to make follow-on investments in our portfolio companies could impair the value of our portfolio.

Followingan initial investment in a portfolio company, we may make additional investments in that portfolio company as “follow-on”investments, in seeking to:

Wehave discretion to make follow-on investments, subject to the availability of capital resources and the provisions of the 1940Act. Failure on our part to make follow-on investments may, in some circumstances, jeopardize the continued viability of a portfoliocompany and our initial investment, or may result in a missed opportunity for us to increase our participation in a successfuloperation. Even if we have sufficient capital to make a desired follow-on investment, we may elect not to make a follow-on investmentbecause we may not want to increase our level of risk, because we prefer other opportunities or because we are inhibited by compliancewith BDC requirements or the desire to maintain our RIC status. Our ability to make follow-on investments may also be limitedby MC Advisors’ allocation policy.

Becausewe do not hold controlling equity interests in the majority of our portfolio companies, we may not be able to exercise controlover our portfolio companies or to prevent decisions by management of our portfolio companies, which could decrease the valueof our investments.

Althoughwe may do so in the future, we do not currently hold controlling equity positions in the majority of our portfolio companies.Our debt investments may provide limited control features such as restrictions, for example, on the ability of a portfolio companyto assume additional debt, or to use the proceeds of our investment for other than certain specified purposes. “Control”under the 1940 Act is presumed at more than 25% equity ownership, and may also be present at lower ownership levels where we providemanagerial assistance. When we do not acquire a controlling equity position in a portfolio company, we may be subject to the riskthat a portfolio company may make business decisions with which we disagree, and that the management and/or stockholders of aportfolio company may take risks or otherwise act in ways that are adverse to our interests. Due to the lack of liquidity of thedebt and equity investments that we typically hold in our portfolio companies, we may not be able to dispose of our investmentsin the event we disagree with the actions of a portfolio company and may therefore suffer a decrease in the value of our investments.

Defaultsby our portfolio companies will harm our operating results.

Aportfolio company’s failure to satisfy financial or operating covenants imposed by us or other lenders could lead to defaultsand, potentially, termination of its loans and foreclosure on its assets. This could trigger cross-defaults under other agreementsand jeopardize such portfolio company’s ability to meet its obligations under the debt or equity securities that we hold.We may incur expenses to the extent necessary to seek recovery upon default or to negotiate new terms, which may include the waiverof certain financial covenants, with a defaulting portfolio company.

Inaddition, many of our investments will likely have a principal amount outstanding at maturity, which could result in a substantialloss to us if the borrower is unable to refinance or repay.

Ourportfolio companies may incur debt that ranks equally with, or senior to, our investments in such companies.

Wegenerally seek to invest capital in senior, unitranche and junior secured loans and, to a lesser extent, unsecured subordinateddebt and equity. The portfolio companies in which we invest usually have, or may be permitted to incur, other debt that ranksequally with, or senior to, the debt securities in which we invest. By their terms, such debt instruments may provide that theholders are entitled to receive payment of interest or principal on or before the dates on which we are entitled to receive paymentsin respect of the debt securities in which we invest. Also, in the event of insolvency, liquidation, dissolution, reorganizationor bankruptcy of a portfolio company, holders of debt instruments ranking senior to our investment in that portfolio company wouldtypically be entitled to receive payment in full before we receive any distribution in respect of our investment. After repayingsenior creditors, the portfolio company may not have any remaining assets to use for repaying its obligation to us. In the caseof debt ranking equally with debt securities in which we invest, we would have to share any distributions on an equal and ratablebasis with other creditors holding such debt in the event of an insolvency, liquidation, dissolution, reorganization or bankruptcyof the relevant portfolio company.

Additionally,certain loans that we make to portfolio companies may be secured on a second-priority basis by the same collateral securing seniorsecured debt of such companies. The first-priority liens on the collateral will secure the portfolio company’s obligationsunder any outstanding senior debt and may secure certain other future debt that may be permitted to be incurred by the portfoliocompany under the agreements governing the loans. The holders of obligations secured by first-priority liens on the collateralwill generally control the liquidation of, and be entitled to receive proceeds from, any realization of the collateral to repaytheir obligations in full before us. In addition, the value of the collateral in the event of liquidation will depend on marketand economic conditions, the availability of buyers and other factors. There can be no assurance that the proceeds, if any, fromsales of all of the collateral would be sufficient to satisfy the loan obligations secured by the second-priority liens afterpayment in full of all obligations secured by the first-priority liens on the collateral. If such proceeds were not sufficientto repay amounts outstanding under the loan obligations secured by the second-priority liens, then, to the extent not repaid fromthe proceeds of the sale of the collateral, we will only have an unsecured claim against the portfolio company’s remainingassets, if any.

Therights we may have with respect to the collateral securing the loans we make to our portfolio companies with senior debt outstandingmay also be limited pursuant to the terms of one or more intercreditor agreements that we enter into with the holders of suchsenior debt, including in unitranche secured transactions. Under a typical intercreditor agreement, at any time that obligationsthat have the benefit of the first-priority liens are outstanding, any of the following actions that may be taken in respect ofthe collateral will be at the direction of the holders of the obligations secured by the first-priority liens:

Wemay not have the ability to control or direct such actions, even if our rights are adversely affected. In addition, a bankruptcycourt may choose not to enforce an intercreditor agreement or other agreement with creditors.

Wemay also make unsecured loans to portfolio companies, meaning that such loans will not benefit from any interest in collateralof such companies. Liens on such portfolio companies’ collateral, if any, will secure the portfolio company’s obligationsunder its outstanding secured debt and may secure certain future debt that is permitted to be incurred by the portfolio companyunder its secured loan agreements. The holders of obligations secured by such liens will generally control the liquidation of,and be entitled to receive proceeds from, any realization of such collateral to repay their obligations in full before us. Inaddition, the value of such collateral in the event of liquidation will depend on market and economic conditions, the availabilityof buyers and other factors. There can be no assurance that the proceeds, if any, from sales of such collateral would be sufficientto satisfy our unsecured loan obligations after payment in full of all secured loan obligations. If such proceeds were not sufficientto repay the outstanding secured loan obligations, then our unsecured claims would rank equally with the unpaid portion of suchsecured creditors’ claims against the portfolio company’s remaining assets, if any.

Wemay also make subordinated investments that rank below other obligations of the obligor in right of payment. Subordinated investmentsare generally more volatile than secured loans and are subject to greater risk of default than senior obligations as a resultof adverse changes in the financial condition of the obligor or in general economic conditions. If we make a subordinated investmentin a portfolio company, the portfolio company may be highly leveraged, and its relatively high LTV ratio may create increasedrisks that its operations might not generate sufficient cash flow to service all of its debt obligations.

Wemay be subject to risks associated with syndicated loans.

Fromtime to time, our investments may consist of syndicated loans. Under the documentation for such loans, a financial institutionor other entity typically is designated as the administrative agent and/or collateral agent. This agent is granted a lien on anycollateral on behalf of the other lenders and distributes payments on the indebtedness as they are received. The agent is theparty responsible for administering and enforcing the loan and generally may take actions only in accordance with the instructionsof a majority or two-thirds in commitments and/or principal amount of the associated indebtedness. In most cases, we do not expectto hold a sufficient amount of the indebtedness to be able to compel any actions by the agent. Accordingly, we may be precludedfrom directing such actions unless we act together with other holders of the indebtedness. If we are unable to direct such actions,we cannot assure you that the actions taken will be in our best interests.

Thereis a risk that a loan agent may become bankrupt or insolvent. Such an event would delay, and possibly impair, any enforcementactions undertaken by holders of the associated indebtedness, including attempts to realize upon the collateral securing the associatedindebtedness and/or direct the agent to take actions against the related obligor or the collateral securing the associated indebtednessand actions to realize on proceeds of payments made by obligors that are in the possession or control of any other financial institution.In addition, we may be unable to remove the agent in circumstances in which removal would be in our best interests. Moreover,agented loans typically allow for the agent to resign with certain advance notice.

Thedisposition of our investments may result in contingent liabilities.

Asignificant portion of our investments involve private securities. In connection with the disposition of an investment in privatesecurities, we may be required to make representations about the business and financial affairs of the portfolio company typicalof those made in connection with the sale of a business. We may also be required to indemnify the purchasers of such investmentto the extent that any such representations turn out to be inaccurate or with respect to potential liabilities. These arrangementsmay result in contingent liabilities that ultimately result in funding obligations that we must satisfy through our return ofdistributions previously made to us.

Investmentsin securities of foreign companies, if any, may involve significant risks in addition to the risks inherent in U.S. investments.

Wemay make investments in securities of foreign companies. Investing in foreign companies may expose us to additional risks nottypically associated with investing in U.S. companies, including changes in exchange control regulations, political and socialinstability, expropriation and imposition of foreign taxes. In addition, any investments that we make that are denominated ina foreign currency will be subject to the risk that the value of a particular currency will change in relation to one or moreother currencies. Factors such as trade balances, the level of short-term interest rates, differences in relative values of similarassets in different currencies, long-term opportunities for investment and capital appreciation and political developments mayaffect currency values. We may employ hedging techniques to minimize these risks, but we cannot assure you that we will, in fact,hedge currency risk, or, that if we do, such strategies will be effective.

Wemay be subject to additional risks if we engage in hedging transactions and/or invest in foreign securities.

The1940 Act generally requires that 70% of our investments be in issuers each of whom, in addition to other requirements, is organizedunder the laws of, and has its principal place of business in, any state of the United States, the District of Columbia, PuertoRico, the Virgin Islands or any other possession of the United States. Our investment strategy does not contemplate a significantnumber of investments in securities of non-U.S. companies. We expect that these investments would focus on the same investmentsthat we make in U.S. middle-market companies and, accordingly, would be complementary to our overall strategy and enhance thediversity of our holdings.

Tothe extent that these investments are denominated in a foreign currency, we may engage in hedging transactions. Engaging in eitherhedging transactions or investing in foreign securities would entail additional risks to our stockholders. We may, for example,use instruments such as interest rate swaps, caps, collars and floors, forward contracts or currency options or borrow under arevolving credit facility in foreign currencies to minimize our foreign currency exposure. In each such case, we generally wouldseek to hedge against fluctuations of the relative values of our portfolio positions from changes in market interest rates orcurrency exchange rates. Hedging against a decline in the values of our portfolio positions would not eliminate the possibilityof fluctuations in the values of such positions or prevent losses if the values of the positions declined. However, such hedgingcould establish other positions designed to gain from those same developments, thereby offsetting the decline in the value ofsuch portfolio positions. Such hedging transactions could also limit the opportunity for gain if the values of the underlyingportfolio positions increased. Moreover, it might not be possible to hedge against an exchange rate or interest rate fluctuationthat was so generally anticipated that we would not be able to enter into a hedging transaction at an acceptable price. Our abilityto engage in hedging transactions may also be adversely affected by recent rules adopted by the U.S. Commodity Futures TradingCommission.

Whilewe may enter into such transactions to seek to reduce currency exchange rate and interest rate risks, unanticipated changes incurrency exchange rates or interest rates could result in poorer overall investment performance than if we had not engaged inany such hedging transactions. In addition, the degree of correlation between price movements of the instruments used in a hedgingstrategy and price movements in the portfolio positions being hedged could vary. Moreover, for a variety of reasons, we mightnot seek to establish a perfect correlation between the hedging instruments and the portfolio holdings being hedged. Any suchimperfect correlation could prevent us from achieving the intended hedge and expose us to risk of loss. In addition, it mightnot be possible to hedge fully or perfectly against currency fluctuations affecting the value of securities denominated in non-U.S.currencies because the value of those securities would likely fluctuate as a result of factors not related to currency fluctuations.

Wemay not realize gains from our equity investments.

Wecurrently hold, and we may in the future make, investments that include warrants or other equity or equity-related securities.In addition, we may from time to time make non-control, equity co-investments in companies in conjunction with private equitysponsors. Our goal is ultimately to realize gains upon our disposition of such equity interests. However, the equity interestswe receive may not appreciate in value and, in fact, may decline in value. Accordingly, we may not be able to realize gains fromour equity interests, and any gains that we do realize on the disposition of any equity interests may not be sufficient to offsetany other losses we experience. We also may be unable to realize any value if a portfolio company does not have a liquidity event,such as a sale of the business, recapitalization or public offering, which would allow us to sell the underlying equity interests.We often seek puts or similar rights to give us the right to sell our equity securities back to the portfolio company issuer.We may be unable to exercise these put rights for the consideration provided in our investment documents if the issuer is in financialdistress.

RisksRelating to Our Common Stock

Wemay not be able to pay distributions, our distributions may not grow over time and/or a portion of our distributions may be areturn of capital.

Wehave paid and intend to continue to pay distributions to our stockholders out of assets legally available for distribution. Wecannot assure you that we will achieve investment results that will allow us to sustain a specified level of cash distributionsor make periodic increases in cash distributions. Our ability to pay distributions might be adversely affected by, among otherthings, the impact of one or more of the risk factors described herein. In addition, the inability to satisfy the asset coveragetest applicable to us as a BDC could limit our ability to pay distributions. All distributions will be paid at the discretionof our Board and will depend on our earnings, our financial condition, maintenance of our RIC status, compliance with applicableBDC regulations and such other factors as our Board may deem relevant from time to time. We cannot assure you that we will continueto pay distributions to our stockholders.

Whenwe make distributions, we will be required to determine the extent to which such distributions are paid out of current or accumulatedearnings and profits. Distributions in excess of current and accumulated earnings and profits will be treated as a non-taxablereturn of capital to the extent of an investor’s basis in our stock and, assuming that an investor holds our stock as acapital asset, thereafter as a capital gain.

Ifthe current period of capital market disruption and instability continues for an extended period of time, there is a risk thatour stockholders may not receive distributions or that our distributions may decline over time and a portion of our distributionsto you may be a return of capital for U.S. federal income tax purposes.

Weintend to make distributions to our stockholders out of assets legally available for distribution. We cannot assure you that wewill achieve investment results that will allow us to make or maintain a specified level of cash distributions and we may chooseto pay a portion of dividends in our own stock. Our ability to pay distributions might be adversely affected by the impact ofone or more of the risk factors described in this report, including the COVID-19 pandemic described above. For example, if thetemporary closure of many corporate offices, retail stores, and manufacturing facilities and factories in the jurisdictions, includingthe United States, affected by the COVID-19 pandemic were to continue for an extended period of time it could result in reducedcash flows to us from our existing portfolio companies, which could reduce cash available for distribution to our stockholders.In addition, due to the asset coverage test applicable to us as a BDC, we may be limited in our ability to make distributions.Our revolving credit facility may also limit our ability to declare dividends if we default under certain provisions. Further,if we invest a greater amount of assets in equity securities that do not pay current dividends, it could reduce the amount availablefor distribution. The above referenced restrictions on distributions may also inhibit our ability to make required interest paymentsto holders of our debt, which may cause a default under the terms of our debt agreements. Such a default could materially increaseour cost of raising capital, as well as cause us to incur penalties under the terms of our debt agreements.

Thedistributions we pay to our stockholders in a year may exceed our taxable income for that year and, accordingly, a portion ofsuch distributions may constitute a return of capital for U.S. federal income tax purposes that would reduce a stockholder’sadjusted tax basis in its shares of our common stock or preferred stock and correspondingly increase such stockholder’sgain, or reduce such stockholder’s loss, on disposition of such shares. Distributions in excess of a stockholder’sadjusted tax basis in its shares of our common stock or preferred stock will constitute capital gains to such stockholder.

Wemay choose to pay a portion of our dividends in our own stock, in which case you may be required to pay tax in excess of the cashyou receive.

Wehave adopted a dividend reinvestment plan that provides for reinvestment of our dividends and other distributions on behalf ofour stockholders, unless a stockholder elects to receive cash pursuant to such plan. We may distribute taxable dividends thatare payable in part in our stock. Taxable stockholders receiving such dividends will be required to include the full amount ofthe dividend as ordinary income (or as long-term capital gain or qualified dividend income to the extent such distribution isproperly reported as such) to the extent of our current and accumulated earnings and profits for U.S. federal income tax purposes.The tax rate for ordinary income will vary depending on a stockholder’s particular characteristics. For individuals, thetop marginal federal ordinary income tax rate is 37%. To the extent distributions paid by us to non-corporate stockholders (includingindividuals) are attributable to dividends from U.S. corporations and certain qualified foreign corporations, such distributionsgenerally will be eligible for a maximum qualified dividend federal tax rate of 20%. However, in this regard, it is anticipatedthat distributions paid by us will generally not be attributable to such dividends and, therefore, generally will not qualifyfor the preferential federal tax rate. Distributions of our net capital gains (which is generally our realized net long-term capitalgains in excess of realized net short-term capital losses) properly reported by us as “capital gain dividends” willbe taxable to a U.S. stockholder as long-term capital gains currently at a maximum federal tax rate of 20%.

Asa result of receiving dividends in the form of our common stock, a U.S. stockholder may be required to pay tax with respect tosuch dividends in excess of any cash received. If a U.S. stockholder sells the stock it receives as a dividend in order to paythis tax, the sales proceeds may be less than the amount included in income with respect to the dividend, depending on the marketprice of our stock at the time of the sale. Furthermore, with respect to non-U.S. stockholders, we may be required to withholdfederal tax with respect to such dividends, including in respect of all or a portion of such dividend that is payable in sharesof our common stock. In addition, if a significant number of our stockholders determine to sell shares of our stock in order topay taxes owed on dividends, it may put downward pressure on the trading price of shares of our common stock.

Inaddition, as discussed above, our loans may contain a PIK interest provision. The PIK interest, computed at the contractual ratespecified in each loan agreement, is added to the principal balance of the loan and recorded as interest income. To avoid theimposition of corporate-level tax, we will need to make sufficient distributions, a portion of which may be paid in shares ofour common stock, regardless of whether our recognition of income is accompanied by a corresponding receipt of cash.

Ifwe sell common stock at a discount to our net asset value per share, stockholders who do not participate in such sale will experienceimmediate dilution in an amount that may be material.

Theissuance or sale by us of shares of our common stock at a price per share, after offering expenses and commission, that is a discountto net asset value poses a risk of dilution to our stockholders. In particular, stockholders who do not purchase additional sharesat or below the discounted price in proportion to their current ownership will experience an immediate decrease in net asset valueper share (as well as in the aggregate net asset value of their shares if they do not participate at all). These stockholderswill also experience a disproportionately greater decrease in their participation in our earnings and assets and their votingpower than the increase we experience in our assets, potential earning power and voting interests from such issuance or sale.In addition, such sales may adversely affect the price at which our common stock trades.

Investingin our common stock may involve an above-average degree of risk.

Theinvestments we make in accordance with our investment objective may result in a higher amount of risk than alternative investmentoptions and a higher risk of volatility or loss of principal. Our investments in portfolio companies may be highly speculativeand aggressive and, therefore, an investment in our common stock may not be suitable for someone with lower risk tolerance.

Sharesof closed-end investment companies, including BDCs, often trade at a discount to their net asset value.

Sharesof closed-end investment companies, including BDCs, may trade at a discount from net asset value. This characteristic of closed-endinvestment companies and BDCs is separate and distinct from the risk that our net asset value per share may decline. We cannotpredict whether our common stock will trade at, above or below net asset value.

Provisionsof the Maryland General Corporation Law and our charter and bylaws could deter takeover attempts and have an adverse effect onthe price of our common stock.

TheMaryland General Corporation Law and our charter and bylaws contain provisions that may discourage, delay or make more difficulta change in control of us or the removal of our directors. We are subject to the Maryland Business Combination Act, subject toany applicable requirements of the 1940 Act. Our Board has adopted a resolution exempting from the Maryland Business CombinationAct any business combination between us and any other person, subject to prior approval of such business combination by our Board,including approval by a majority of our independent directors. If the resolution exempting business combinations is repealed orour Board does not approve a business combination, the Maryland Business Combination Act may discourage third parties from tryingto acquire control of us and increase the difficulty of consummating such an offer. The SEC staff has taken the position that,under the 1940 Act, an investment company may not avail itself of the Maryland Control Share Acquisition Act. As a result, wewill amend our bylaws to be subject to the Maryland Control Share Acquisition Act, only if the Board determines that it wouldbe in our best interests and, after notification, the SEC staff does not object to our determination that our being subject tothe Maryland Control Share Acquisition Act does not conflict with the 1940 Act. If such conditions are met, and we amend our bylawsto repeal the exemption from the Maryland Control Share Acquisition Act, the Maryland Control Share Acquisition Act also may makeit more difficult for a third party to obtain control of us and increase the difficulty of consummating such a transaction.

Wehave adopted certain measures that may make it difficult for a third-party to obtain control of us, including provisions of ourcharter classifying our Board in three staggered terms and authorizing our Board to classify or reclassify shares of our capitalstock in one or more classes or series and to cause the issuance of additional shares of our stock. These provisions, as wellas other provisions of our charter and bylaws, may delay, defer or prevent a transaction or a change in control that might otherwisebe in the best interests of our stockholders.

Themarket price of our securities may fluctuate significantly.

Themarket price and liquidity of the market for our securities may be significantly affected by numerous factors, some of which arebeyond our control and may not be directly related to our operating performance. These factors may include:

RisksRelated to the 2026 Notes

The4.75% Notes due 2026 (the “2026 Notes”) are unsecured and therefore are effectively subordinated to any securedindebtedness we have incurred or may incur in the future.

The2026 Notes are not secured by any of our assets or any of the assets of any of our subsidiaries. As a result, the 2026 Notes areeffectively subordinated to any secured indebtedness we or our subsidiaries have incurred or that we or our subsidiaries may incurin the future (or any indebtedness that is initially unsecured as to which we subsequently grant a security interest) to the extentof the value of the assets securing such indebtedness. In any liquidation, dissolution, bankruptcy or other similar proceeding,the holders of any of our existing or future secured indebtedness and the secured indebtedness of our subsidiaries may assertrights against the assets pledged to secure that indebtedness in order to receive full payment of their indebtedness before theassets may be used to pay other creditors, including the holders of the 2026 Notes. As of December 31, 2020, we had $126.6 millionin outstanding indebtedness under the revolving credit facility. The indebtedness under the revolving credit facility is effectivelysenior to the 2026 Notes to the extent of the value of the assets securing such indebtedness.

The2026 Notes are structurally subordinated to the indebtedness and other liabilities of our subsidiaries.

The2026 Notes are obligations exclusively of the Company, and not of any of our subsidiaries. None of our subsidiaries is a guarantorof the 2026 Notes, and the 2026 Notes are not required to be guaranteed by any subsidiary we may acquire or create in the future.Any assets of our subsidiaries are not directly available to satisfy the claims of our creditors, including holders of the 2026Notes. Except to the extent we are a creditor with recognized claims against our subsidiaries, all claims of creditors of oursubsidiaries will have priority over our equity interests in such entities (and therefore the claims of our creditors, includingholders of the 2026 Notes) with respect to the assets of such entities. Even if we are recognized as a creditor of one or moreof these entities, our claims would still be effectively subordinated to any security interests in the assets of any such entityand to any indebtedness or other liabilities of any such entity senior to our claims. Consequently, the 2026 Notes are structurallysubordinated to all indebtedness and other liabilities, including trade payables, of any of our existing or future subsidiaries,including MRCC SBIC. As of December 31, 2020, our subsidiaries had total indebtedness outstanding of $115.0 million. Certain ofthese entities (excluding MRCC SBIC) currently serve as guarantors under our revolving credit facility, and in the future oursubsidiaries may incur substantial additional indebtedness, all of which is and would be structurally senior to the 2026 Notes.

Theindenture under which the 2026 Notes are issued contains limited protection for holders of the 2026 Notes.

Theindenture under which the 2026 Notes are issued offers limited protection to holders of the 2026 Notes. The terms of the indentureand the 2026 Notes do not restrict our or any of our subsidiaries’ ability to engage in, or otherwise be a party to, a varietyof corporate transactions, circumstances or events that could have an adverse impact on investments in the 2026 Notes. In particular,the terms of the indenture and the 2026 Notes do not place any restrictions on our or our subsidiaries’ ability to:

Furthermore,the terms of the indenture and the 2026 Notes do not protect holders of the 2026 Notes in the event that we experience changes(including significant adverse changes) in our financial condition, results of operations or credit ratings, if any, as they donot require that we or our subsidiaries adhere to any financial tests or ratios or specified levels of net worth, revenues, income,cash flow, or liquidity.

Ourability to recapitalize, incur additional debt (including additional debt that matures prior to the maturity of the 2026 Notes)and take a number of other actions that are not limited by the terms of the 2026 Notes may have important consequences for youas a holder of the 2026 Notes, including making it more difficult for us to satisfy our obligations with respect to the 2026 Notesor negatively affecting the market value of the 2026 Notes.

Otherdebt we issue or incur in the future could contain more protections for its holders than the indenture and the 2026 Notes, includingadditional covenants and events of default. The issuance or incurrence of any such debt with incremental protections could affectthe market for, trading levels, and prices of the 2026 Notes.

The2026 Notes may or may not have an established trading market. If a trading market in the 2026 Notes is developed, it may not bemaintained.

The2026 Notes may or may not have an established trading market. If a trading market in the 2026 Notes is developed, it may not bemaintained. If the 2026 Notes are traded, they may trade at a discount to their initial offering price depending on prevailinginterest rates, the market for similar securities, our credit ratings, our financial condition or other relevant factors. Accordingly,we cannot assure you that a liquid trading market has been or will develop for the 2026 Notes, that you will be able to sell your2026 Notes at a particular time or that the price you receive when you sell will be favorable. To the extent an active tradingmarket does not develop or is not maintained, the liquidity and trading price for the 2026 Notes may be harmed. Accordingly, youmay be required to bear the financial risk of an investment in the 2026 Notes for an indefinite period of time.

Ifwe default on our obligations to pay our other indebtedness, we may not be able to make payments on the 2026 Notes.

Asof December 31, 2020, we had approximately $126.6 million of indebtedness outstanding under the revolving credit facility. Anydefault under the agreements governing our indebtedness, including a default under the revolving credit facility or other indebtednessto which we may be a party that is not waived by the required lenders, and the remedies sought by lenders or the holders of suchindebtedness could make us unable to pay principal, premium, if any, and interest on the 2026 Notes and substantially decreasethe market value of the 2026 Notes. If we are unable to generate sufficient cash flow and are otherwise unable to obtain fundsnecessary to meet required payments of principal, premium, if any, and interest on our indebtedness, or if we otherwise fail tocomply with the various covenants, including financial and operating covenants, in the instruments governing our indebtedness(including the revolving credit facility), we could be in default under the terms of the agreements governing such indebtedness,including the 2026 Notes. In the event of such default, the holders of such indebtedness could elect to declare all the fundsborrowed thereunder to be due and payable, together with accrued and unpaid interest, the lenders under the revolving credit facilityor other debt we may incur in the future could elect to terminate their commitment, cease making further loans and institute foreclosureproceedings against our assets, and we could be forced into bankruptcy or liquidation.

Ifour operating performance declines and we are not able to generate sufficient cash flow to service our debt obligations, we mayin the future need to refinance or restructure our debt, including the 2026 Notes, sell assets, reduce or delay capital investments,seek to raise additional capital or seek to obtain waivers from the lenders under the revolving credit facility or other debtthat we may incur in the future to avoid being in default. If we are unable to implement one or more of these alternatives, wemay not be able to meet our payment obligations under the 2026 Notes and our other debt. If we breach our covenants under therevolving credit facility or any of our other debt and seek a waiver, we may not be able to obtain a waiver from the requiredlenders or holders thereof. If this occurs, we would be in default under the revolving credit facility or other debt, the lendersor holders could exercise their rights as described above, and we could be forced into bankruptcy or liquidation. If we are unableto repay debt, lenders having secured obligations, including the lenders under the revolving credit facility, could proceed againstthe collateral securing the debt. Because the revolving credit facility has, and any future credit facilities will likely have,customary cross-default provisions, if we have a default under the terms of the 2026 Notes, the obligations under the revolvingcredit facility or any future credit facility may be accelerated and we may be unable to repay or finance the amounts due.

Wemay choose to redeem the 2026 Notes when prevailing interest rates are relatively low.

The2026 Notes are redeemable in whole or in part upon certain conditions at any time or from time to time at our option. We may chooseto redeem the 2026 Notes from time to time, especially if prevailing interest rates are lower than the rate borne by the 2026Notes. If prevailing rates are lower at the time of redemption, and we redeem the 2026 Notes, you likely would not be able toreinvest the redemption proceeds in a comparable security at an effective interest rate as high as the interest rate on the 2026Notes being redeemed. Our redemption right also may adversely impact your ability to sell the 2026 Notes as the optional redemptiondate or period approaches.

Wemay not be able to repurchase the 2026 Notes upon a Change of Control Repurchase Event.

Wemay not be able to repurchase the 2026 Notes upon certain change in control events described in the indentures under which the2026 Notes were issued (each, a “Change of Control Repurchase Event”) because we may not have sufficient funds. Wewould not be able to borrow under our revolving credit facility to finance such a repurchase of the 2026 Notes, and we expectthat any future credit facility would have similar limitations. Upon a Change of Control Repurchase Event, holders of the 2026Notes may require us to repurchase for cash some or all of the 2026 Notes at a repurchase price equal to 100% of the aggregateprincipal amount of the 2026 Notes being repurchased, plus accrued and unpaid interest to, but not including, the repurchase date.The terms of our revolving credit facility provide that certain change of control events will constitute an event of default thereunderentitling the lenders to accelerate any indebtedness outstanding under our revolving credit facility at that time and to terminateour revolving credit facility. In this regard, the occurrence of a Change of Control Repurchase Event enabling the holders ofthe 2026 Notes to require the mandatory purchase of the 2026 Notes will constitute an event of default under our revolving creditfacility, entitling the lenders to accelerate any indebtedness outstanding under our revolving credit facility at that time andto terminate our revolving credit facility. As a result, we may not be able to comply with our obligations under the Change ofControl Repurchase Event provisions of the indenture governing the 2026 Notes unless we were to obtain the consent of the lendersunder the revolving credit facility or find another means to do so. Our and our subsidiaries’ future financing facilitiesmay contain similar restrictions and provisions. Our failure to purchase such tendered 2026 Notes upon the occurrence of suchChange of Control Repurchase Event would cause an event of default under the indenture governing the 2026 Notes and a cross-defaultunder the agreements governing the revolving credit facility, which may result in the acceleration of such indebtedness requiringus to repay that indebtedness immediately. If the holders of the 2026 Notes exercise their right to require us to repurchase 2026Notes upon a Change of Control Repurchase Event, the financial effect of this repurchase could cause a default under our currentand future debt instruments, and we may not have sufficient funds to repay any such accelerated indebtedness.

Adowngrade, suspension or withdrawal of the credit rating assigned by a rating agency to us or the 2026 Notes or change in thedebt markets could cause the liquidity or market value of the 2026 Notes to decline significantly.

Ourcredit ratings are an assessment by rating agencies of our ability to pay our debts when due. Consequently, real or anticipatedchanges in our credit ratings will generally affect the market value of the 2026 Notes. These credit ratings may not reflect thepotential impact of risks relating to the structure or marketing of the 2026 Notes. Credit ratings are not a recommendation tobuy, sell or hold any security, and may be revised or withdrawn at any time by the issuing organization in its sole discretion.Neither we nor any underwriter undertakes any obligation to maintain our credit ratings or to advise holders of 2026 Notes ofany changes in our credit ratings. There can be no assurance that our credit ratings will remain for any given period of timeor that such credit ratings will not be lowered or withdrawn entirely by the rating agencies if in their judgment future circumstancesrelating to the basis of the credit ratings, such as adverse changes in our company, so warrant. The conditions of the financialmarkets and prevailing interest rates have fluctuated in the past and are likely to fluctuate in the future, which could havean adverse effect on the market prices of the Notes.

GeneralRisk Factors

Thefailure in cyber security systems, as well as the occurrence of events unanticipated in our disaster recovery systems and managementcontinuity planning, could impair our ability to conduct business effectively.

Theoccurrence of a disaster such as a cyber-attack, a natural catastrophe, an industrial accident, a terrorist attack or war, eventsunanticipated in our disaster recovery systems, or a support failure from external providers, could have an adverse effect onour ability to conduct business and on our results of operations and financial condition, particularly if those events affectour computer-based data processing, transmission, storage, and retrieval systems or destroy data. If a significant number of MonroeCapital employees were unavailable in the event of a disaster, our ability to effectively conduct our business could be severelycompromised.

Wedepend heavily upon computer systems to perform necessary business functions. Despite our implementation of a variety of securitymeasures, our computer systems could be subject to cyber-attacks and unauthorized access, such as physical and electronic break-insor unauthorized tampering. Like other companies, we may experience threats to our data and systems, including malware and computervirus attacks, unauthorized access, system failures and disruptions. If one or more of these events occurs, it could potentiallyjeopardize the confidential, proprietary and other information processed and stored in, and transmitted through, our computersystems and networks, or otherwise cause interruptions or malfunctions in our operations, which could result in damage to ourreputation, financial losses, litigation, increased costs, regulatory penalties and/or customer dissatisfaction or loss.

Adisaster or a disruption in the infrastructure that supports our business, including a disruption involving electronic communicationsor other services used by us or third parties with whom we conduct business, or directly affecting our headquarters, could havea material adverse impact on our ability to continue to operate our business without interruption. Our disaster recovery programsmay not be sufficient to mitigate the harm that may result from such a disaster or disruption. In addition, insurance and othersafeguards might only partially reimburse us for our losses, if at all.

Thirdparties with which we do business may also be sources of cybersecurity or other technological risk. We outsource certain functionsand these relationships allow for the storage and processing of our information, as well as client, counterparty, employee, andborrower information. While we engage in actions to reduce our exposure resulting from outsourcing, ongoing threats may resultin unauthorized access, loss, exposure, destruction, or other cybersecurity incident that affects our data, resulting in increasedcosts and other consequences as described above.

Inaddition, cybersecurity has become a top priority for regulators around the world, and some jurisdictions have enacted laws requiringcompanies to notify individuals of data security breaches involving certain types of personal data. If we fail to comply withthe relevant laws and regulations, we could suffer financial losses, a disruption of our businesses, liability to investors, regulatoryintervention or reputational damage.

Adata breach could negatively impact our business and result in significant penalties.

MCAdvisors is subject to numerous laws in various jurisdictions relating to privacy and the storage, sharing, use, processing, disclosureand protection of information that we and our affiliates hold. The European Union’s (the “EU”) General DataProtection Regulation, the Cayman Islands Data Protection Law, 2017, and the California Consumer Privacy Act of 2018 are recentexamples of such laws, and MC Advisors anticipates new privacy and data protection laws will be passed in other jurisdictionsin the future. In general, these laws introduce many new obligations on MC Advisors and its affiliates and service providers andcreate new rights for parties who have given us their personal information, such as investors and others.

Breachof these laws could result in significant financial penalties for MC Advisors and/or us. As interpretation of these laws evolvesand new laws are passed, MC Advisors could be required to make changes to its business practices, which could result in additionalrisks, costs and liabilities to us and adversely affect investment returns. While MC Advisors intends to comply with its privacyand data protection obligations under the privacy and data protection laws that are applicable to it, it is possible that MC Advisorswill not be able to accurately anticipate the ways in which regulators and courts will apply or interpret these laws. A violationof applicable privacy and data protection law could result in negative publicity and/or subject MC Advisors or us, to significantcosts associated with litigation, settlements, regulatory action, judgments, liabilities and/or penalties.

ITEM1B. UNRESOLVED STAFF COMMENTS

None.

ITEM2. PROPERTIES

Wedo not own any real estate or other physical properties materially important to our operation. The principal executiveoffices of Monroe Capital are located at 311 South Wacker Drive, Suite 6400, Chicago, Illinois 60606. Monroe Capital and itsaffiliates currently have additional offices, and/or company representatives in New York, New York; Los Angeles, California;San Francisco, California; Atlanta, Georgia; and Boston, Massachusetts. MC Management furnishes us office space, andwe reimburse it for such costs on an allocated basis.

ITEM3. LEGAL PROCEEDINGS

Neitherwe nor our investment adviser is currently subject to any material legal proceedings.

ITEM4. MINE SAFETY DISCLOSURES

Notapplicable.

PARTII

ITEM5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

COMMONSTOCK

Ourcommon stock is traded on The Nasdaq Global Select Market under the ticker symbol “MRCC.” Our common stock has historicallytraded at prices both above and below our net asset value per share. It is not possible to predict whether our common stock willtrade at, above or below net asset value.

HOLDERS

Asof March 1, 2021, there were seven holders of record of our common stock. This does not include the number of stockholders thathold shares in “street name” through banks or broker-dealers.

DISTRIBUTIONS

Wecurrently intend to make distributions to our stockholders on a quarterly basis out of assets legally available for distribution.We may also make additional distributions to our stockholders from time to time. Our quarterly and additional distributions, ifany, will be determined by our board of directors.

Ourrevolving credit facility, as amended, imposes certain conditions that may limit the amount of our distributions to stockholders.Distributions payable in our common stock under our dividend reinvestment plan are not limited by the revolving credit facility.Distributions in cash or property other than our common stock are generally limited to 115% of the amount of distributions requiredto maintain our status as a RIC.

InOctober 2012, we adopted an “opt out” dividend reinvestment plan for our common stockholders. When we declare a distribution,our stockholders’ cash distributions will be automatically reinvested in additional shares of our common stock unless astockholder specifically “opts out” of our dividend reinvestment plan. If a stockholder opts out, that stockholderwill receive cash distributions.

PERFORMANCEGRAPH

Thefollowing graph compares the return on our common stock from December 31, 2015 to December 31, 2020 with that of the Standard & Poor’s 500 Stock Index and the NASDAQ Financial 100 index. The graph assumes that on December 31, 2015, a person invested$100 in each of our common stock, the Standard & Poor’s 500 Stock Index and the NASDAQ Financial 100 index. The graphmeasures total stockholder return, which takes into account both changes in stock price and dividends. The graph also assumesthe reinvestment of all dividends prior to any tax effect. The graph and other information furnished under this Part II Item 5of this Annual Report on Form 10-K shall not be deemed to be “soliciting material” or to be “filed” withthe SEC or subject to Regulation 14A or 14C under, or to the liabilities of Section 18 of, the Exchange Act. The stock price performanceincluded in the below graph is not necessarily indicative of future stock performance.

PriceRange of Common Stock and Distributions

Ourcommon stock began trading on The Nasdaq Global Market under the ticker symbol “MRCC” on October 25, 2012. Priorto that date, there was no established trading market for our common stock. Our common stock is now traded on the Nasdaq GlobalSelect Market. Our common stock has historically traded both above and below net asset value (“NAV”).

Thefollowing table sets forth the high and low closing sales prices of our common stock, the closing sales price as a percentageof our NAV and the distributions declared by us since January 1, 2019:

ITEM6. SELECTED CONSOLIDATED FINANCIAL DATA

Thefollowing selected consolidated financial data of the Company are derived from our consolidated financial statements that havebeen audited by RSM US LLP (“RSM”), our independent registered public accounting firm. This consolidated financialdata should be read in conjunction with our consolidated financial statements and related notes thereto included elsewhere inthis Annual Report on Form 10-K and with Management’s Discussion and Analysis of Financial Condition and Results of Operationswhich follows (dollars in thousands, except per share data):

ITEM7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Thefollowing discussion should be read in conjunction with our audited consolidated financial statements and related notes and otherfinancial information appearing elsewhere in this Annual Report on Form 10-K. In addition to historical information, the followingdiscussion and other parts of this Annual Report on Form 10-K contain forward-looking information that involves risks and uncertainties.

Pleasesee “Risk Factors” and “Special Note Regarding Forward-Looking Statements” for a discussion of the uncertainties,risks and assumptions associated with these statements.

Overview

MonroeCapital Corporation is an externally managed, closed-end, non-diversified management investment company that has elected to beregulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940Act”). In addition, for U.S. federal income tax purposes, we have elected to be treated as a regulated investment company(“RIC”) under the subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). We are aspecialty finance company focused on providing financing solutions primarily to lower middle-market companies in the United Statesand Canada. We provide customized financing solutions focused primarily on senior secured, junior secured and unitranche secured(a combination of senior secured and junior secured debt in the same facility in which we syndicate a “first out”portion of the loan to an investor and retain a “last out” portion of the loan) debt and, to a lesser extent, unsecuredsubordinated debt and equity, including equity co-investments in preferred and common stock, and warrants.

Ourshares are currently listed on the NASDAQ Global Select Market under the symbol “MRCC”.

Ourinvestment objective is to maximize the total return to our stockholders in the form of current income and capital appreciationthrough investment in senior secured, unitranche secured and junior secured debt and, to a lesser extent, unsecured subordinateddebt and equity investments. We seek to use our extensive leveraged finance origination infrastructure and broad expertise insourcing loans to invest in primarily senior secured, unitranche secured and junior secured debt of middle-market companies. Ourinvestments will generally range between $2.0 million and $25.0 million each, although this investment size may vary proportionatelywith the size of our capital base. As of December 31, 2020, our portfolio included approximately 74.1% senior secured loans, 11.7%unitranche secured loans, 2.6% junior secured loans and 11.6% equity securities, compared to December 31, 2019, when our portfolioincluded approximately 77.1% senior secured loans, 12.4% unitranche secured loans, 2.2% junior secured loans and 8.3% equity securities.We expect that the companies in which we invest may be leveraged, often as a result of leveraged buy-outs or other recapitalizationtransactions, and, in certain cases, will not be rated by national ratings agencies. If such companies were rated, we believethat they would typically receive a rating below investment grade (between BB and CCC under the Standard & Poor’s system)from the national rating agencies.

Whileour primary focus is to maximize current income and capital appreciation through debt investments in thinly traded or privateU.S. companies, we may invest a portion of the portfolio in opportunistic investments in order to seek to enhance returns to stockholders.Such investments may include investments in high-yield bonds, distressed debt, private equity or securities of public companiesthat are not thinly traded and securities of middle-market companies located outside of the United States. We expect that thesepublic companies generally will have debt securities that are non-investment grade.

OnFebruary 28, 2014, our wholly-owned subsidiary, Monroe Capital Corporation SBIC, LP (“MRCC SBIC”), a Delaware limitedpartnership, received a license from the Small Business Administration (“SBA”) to operate as a Small Business InvestmentCompany (“SBIC”) under Section 301(c) of the Small Business Investment Act of 1958. MRCC SBIC commenced operationson September 16, 2013. See “ SBA Debentures ” below for more information.

Investmentincome

Wegenerate interest income on the debt investments in portfolio company investments that we originate or acquire. Our debt investments,whether in the form of senior secured, unitranche secured or junior secured debt, typically have an initial term of three to sevenyears and bear interest at a fixed or floating rate. In some instances, we receive payments on our debt investments based on scheduledamortization of the outstanding balances. In addition, we receive repayments of some of our debt investments prior to their scheduledmaturity date. In some cases, our investments provide for deferred interest of payment-in-kind (“PIK”) interest. Inaddition, we may generate revenue in the form of commitment, origination, amendment, structuring or due diligence fees, fees forproviding managerial assistance and consulting fees. Loan origination fees, original issue discount and market discount or premiumare capitalized, and we accrete or amortize such amounts as interest income. We record prepayment premiums and prepayment gains(losses) on loans as interest income. As the frequency or volume of the repayments which trigger these prepayment premiums andprepayment gains (losses) may fluctuate significantly from period to period, the associated interest income recorded may alsofluctuate significantly from period to period. Interest and fee income are recorded on the accrual basis to the extent we expectto collect such amounts. Interest income is accrued based upon the outstanding principal amount and contractual terms of debtand preferred equity investments. Interest is accrued on a daily basis. We record fees on loans based on the determination ofwhether the fee is considered a yield enhancement or payment for a service. If the fee is considered a yield enhancement associatedwith a funding of cash on a loan, the fee is generally deferred and recognized into interest income using the effective interestmethod if captured in the cost basis or using the straight-line method if the loan is unfunded and therefore there is no costbasis. If the fee is not considered a yield enhancement because a service was provided, and the fee is payment for that service,the fee is deemed earned and recognized as fee income in the period the service has been completed.

Dividendincome on preferred equity securities is recorded as dividend income on an accrual basis to the extent that such amounts are payableby the portfolio company and are expected to be collected. Dividend income on common equity securities is recorded on the recorddate for private portfolio companies. Each distribution received from limited liability company (“LLC”) and limitedpartnership (“LP”) investments is evaluated to determine if the distribution should be recorded as dividend incomeor a return of capital. Generally, we will not record distributions from equity investments in LLCs and LPs as dividend incomeunless there are sufficient accumulated tax-basis earnings and profits in the LLC or LP prior to the distribution. Distributionsthat are classified as a return of capital are recorded as a reduction in the cost basis of the investment. The frequency andvolume of the distributions on common equity securities and LLC and LP investments may fluctuate significantly from period toperiod.

Expenses

Ourprimary operating expenses include the payment of base management and incentive fees to MC Advisors, under the investment advisoryand management agreement (the “Investment Advisory Agreement”), the payment of fees to MC Management for our allocableportion of overhead and other expenses under the administration agreement (the “Administration Agreement”) and otheroperating costs. See Note 6 to our consolidated financial statements and “ Related Party Transactions ” belowfor additional information on our Investment Advisory Agreement and Administration Agreement. Our expenses also include interestexpense on our various forms of indebtedness. We bear all other out-of-pocket costs and expenses of our operations and transactions.

Netgain (loss)

Werecognize realized gains or losses on investments based on the difference between the net proceeds from the disposition and thecost basis of the investment without regard to unrealized gains or losses previously recognized. We record current period changesin fair value of investments, foreign currency forward contracts, foreign currency and other transactions within net change inunrealized gain (loss) on the consolidated statements of operations.

Portfolioand Investment Activity

Duringthe year ended December 31, 2020, we invested $73.1 million in 18 new portfolio companies and $70.3 million in 39 existing portfoliocompanies and had $194.6 million in aggregate amount of sales and principal repayments, resulting in net sales and repaymentsof $51.2 million for the year.

Duringthe year ended December 31, 2019, we invested $98.6 million in 18 new portfolio companies and $132.0 million in 33 existing portfoliocompanies and had $166.1 million in aggregate amount of sales and principal repayments, resulting in net investments of $64.5million for the year.

Duringthe year ended December 31, 2018, we invested $112.4 million in 20 new portfolio companies and $128.0 million in 31 existing portfoliocompanies and had $159.2 million in aggregate amount of sales and principal repayments, resulting in net investments of $81.2million for the year.

Thefollowing table shows portfolio yield by security type: